<PAGE>
                              REVOLVING CREDIT AGREEMENT




                              $30,000,000.00 MASTER NOTE
                      SECURED REDUCING REVOLVING LINE OF CREDIT



                                         FROM


                                     COMPASS BANK


                                          TO


                               MIDLAND RESOURCES, INC.,

                      MIDLAND RESOURCES OPERATING COMPANY, INC.

                                         and

                             SUMMIT PETROLEUM CORPORATION


                                  December 17, 1997
<PAGE>

<TABLE>
<CAPTION>
                              TABLE OF CONTENTS
                                                                           PAGE
                                                                           ----
     <C>   <S>                                                             <C>
ARTICLE I.  DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . .  1
ARTICLE II.  THE LOAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
     2.01 The Revolving Line . . . . . . . . . . . . . . . . . . . . . . . . 10
     2.02 Advances and Payments of Principal Under the Note. . . . . . . . . 11
     2.03 Prepayment and Conversion. . . . . . . . . . . . . . . . . . . . . 11
     2.04 Interest Rate and Payments of Interest . . . . . . . . . . . . . . 12
     2.05 Increased Cost of Loans. . . . . . . . . . . . . . . . . . . . . . 14
     2.06 Substitute Rate. . . . . . . . . . . . . . . . . . . . . . . . . . 16
     2.07 Change of Law. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
     2.08 Advances to Satisfy Obligations of Borrower. . . . . . . . . . . . 17
     2.09 Mandatory Prepayment of the Notes. . . . . . . . . . . . . . . . . 17
     2.10 Borrowing Base Determination . . . . . . . . . . . . . . . . . . . 17
     2.11 Assignment of Production . . . . . . . . . . . . . . . . . . . . . 19
     2.12 Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . . . . 20
     2.13 Facility Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
     2.14 Addition of Borrowing Base Properties. . . . . . . . . . . . . . . 20
     2.15 Letters of Credit. . . . . . . . . . . . . . . . . . . . . . . . . 20
     2.16 Repayment of Letters of Credit . . . . . . . . . . . . . . . . . . 21
     2.17 Letter of Credit Fee . . . . . . . . . . . . . . . . . . . . . . . 21

ARTICLE III.  CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 21
     3.01 Receipt of Note, Agreement and Certificate of Compliance . . . . . 21
     3.02 Assignments of First Union Loan Documents. . . . . . . . . . . . . 21
     3.03 Receipt of Organizational Documents. . . . . . . . . . . . . . . . 22
     3.04 Receipt of Certified Copy of Corporate Proceedings and
          Certificates of Incumbency . . . . . . . . . . . . . . . . . . . . 22
     3.05 Receipt of Certificates of Authority and Certificates of Good
          Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
     3.06 UCC Search . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
     3.07 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
     3.08 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 22
     3.09 Request for Advance. . . . . . . . . . . . . . . . . . . . . . . . 22
     3.10 Accuracy of Representations and Warranties and No Event of
          Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
     3.11 Legal Matters Satisfactory to Counsel to Bank. . . . . . . . . . . 23
     3.12 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . 23
     3.13 Status of Title. . . . . . . . . . . . . . . . . . . . . . . . . . 23
     3.14 Security Instruments . . . . . . . . . . . . . . . . . . . . . . . 23
     3.15 Legal Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
     3.16 Opinion of Counsel for Borrower. . . . . . . . . . . . . . . . . . 23
     3.17 Documents Required for Subsequent Disbursements. . . . . . . . . . 23

ARTICLE IV.  REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . 24
     4.01 Existence and Good Standing. . . . . . . . . . . . . . . . . . . . 24
     4.02 Due Authorization. . . . . . . . . . . . . . . . . . . . . . . . . 24
     4.03 Valid and Binding Obligations. . . . . . . . . . . . . . . . . . . 24
     4.04 Title to Borrowing Base Properties . . . . . . . . . . . . . . . . 25
     4.05 Oil and Gas Leases . . . . . . . . . . . . . . . . . . . . . . . . 25
     4.06 Interest in the Borrowing Base Properties. . . . . . . . . . . . . 25
     4.07 Oil and Gas Contracts. . . . . . . . . . . . . . . . . . . . . . . 25
     4.08 Producing Wells. . . . . . . . . . . . . . . . . . . . . . . . . . 26

</TABLE>
                                       i
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     4.09 Purchasers of Production . . . . . . . . . . . . . . . . . . . . . 26
     4.10 Scope and Accuracy of Financial Statements . . . . . . . . . . . . 26
     4.11 Liabilities, Litigation and Restrictions . . . . . . . . . . . . . 26
     4.12 Margin Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
     4.13 Authorizations and Consents. . . . . . . . . . . . . . . . . . . . 27
     4.14 Compliance with Laws, Rules, Regulations and Orders. . . . . . . . 27
     4.15 Proper Filing of Tax Returns and Payment of Taxes Due. . . . . . . 27
     4.16 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
     4.17 Investment Company Act Compliance. . . . . . . . . . . . . . . . . 28
     4.18 Public Utility Holding Company Act Compliance. . . . . . . . . . . 28
     4.19 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . 28

ARTICLE V.  AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . 29
     5.01 Use of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
     5.02 Maintenance and Access to Records. . . . . . . . . . . . . . . . . 29
     5.03 Quarterly Unaudited Financial Statements of Borrower . . . . . . . 30
     5.04 Annual Audited Financial Statements of MRI . . . . . . . . . . . . 30
     5.05 Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . 30
     5.06 Statement of Material Adverse Change in Condition. . . . . . . . . 30
     5.07 Additional Information . . . . . . . . . . . . . . . . . . . . . . 30
     5.08 Compliance with Laws and Payment of Assessments and Charges. . . . 30
     5.09 Maintenance of Existence and Good Standing . . . . . . . . . . . . 31
     5.10 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . 31
     5.11 Initial Expenses of Bank . . . . . . . . . . . . . . . . . . . . . 31
     5.12 Subsequent Expenses of Bank. . . . . . . . . . . . . . . . . . . . 31
     5.13 Maintenance of Tangible Property . . . . . . . . . . . . . . . . . 32
     5.14 Maintenance of Insurance . . . . . . . . . . . . . . . . . . . . . 32
     5.15 Inspection of Tangible Assets/Right of Audit . . . . . . . . . . . 32
     5.16 Payment of Note and Performance of Obligations . . . . . . . . . . 32
     5.17 ERISA Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . 32
     5.18 Tangible Net Worth Requirement . . . . . . . . . . . . . . . . . . 32
     5.19 Cash Flow to Debt Service Ratio. . . . . . . . . . . . . . . . . . 33
     5.20 Compliance with Environmental Laws . . . . . . . . . . . . . . . . 33
     5.21 Hazardous Substances Indemnification . . . . . . . . . . . . . . . 33
     5.22 Changes in Management. . . . . . . . . . . . . . . . . . . . . . . 34
     5.23 Operating Accounts . . . . . . . . . . . . . . . . . . . . . . . . 34

ARTICLE VI.  NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . 34
     6.01 Other Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . 34
     6.02 Guaranty of Payment or Performance . . . . . . . . . . . . . . . . 35
     6.03 Loans, Advances or Investments . . . . . . . . . . . . . . . . . . 35
     6.04 Mortgages or Pledges of Assets . . . . . . . . . . . . . . . . . . 35
     6.05 Nature of Business . . . . . . . . . . . . . . . . . . . . . . . . 35
     6.06 Sales of Assets. . . . . . . . . . . . . . . . . . . . . . . . . . 35
     6.07 Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
     6.08 Payment of Accounts Payable. . . . . . . . . . . . . . . . . . . . 36
     6.09 Cancellation of Insurance. . . . . . . . . . . . . . . . . . . . . 36
     6.10 Changes in Business Structure. . . . . . . . . . . . . . . . . . . 36
     6.11 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . 36
     6.12 Hedging Transactions . . . . . . . . . . . . . . . . . . . . . . . 36

</TABLE>
                                      ii
<PAGE>

<TABLE>
<CAPTION>
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                                                                           PAGE
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     <C>   <S>                                                             <C>
     6.13 New Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . 36

ARTICLE VII.  EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . 36
     7.01 Enumeration of Events of Default . . . . . . . . . . . . . . . . . 36
     7.02 Rights Upon Event of Default . . . . . . . . . . . . . . . . . . . 38
     7.03 Rights Upon Unmatured Event of Default . . . . . . . . . . . . . . 38

ARTICLE VIII.  MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 38
     8.01 Security Interests in Deposits and Right of Offset or Banker's
          Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
     8.02 Survival of Representations, Warranties and Covenants. . . . . . . 39
     8.03 Notices and Other Communications . . . . . . . . . . . . . . . . . 39
     8.04 Parties in Interest. . . . . . . . . . . . . . . . . . . . . . . . 39
     8.05 Renewals and Extensions. . . . . . . . . . . . . . . . . . . . . . 39
     8.06 No Waiver by Bank. . . . . . . . . . . . . . . . . . . . . . . . . 39
     8.07 INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . 40
     8.08 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
     8.09 Incorporation of Exhibits. . . . . . . . . . . . . . . . . . . . . 40
     8.10 Survival Upon Unenforceability . . . . . . . . . . . . . . . . . . 40
     8.11 Rights of Third Parties. . . . . . . . . . . . . . . . . . . . . . 40
     8.12 Amendments or Modifications of this Agreement. . . . . . . . . . . 40
     8.13 Agreement Construed as an Entirety . . . . . . . . . . . . . . . . 41
     8.14 Number and Gender. . . . . . . . . . . . . . . . . . . . . . . . . 41
     8.15 AGREEMENT SUPERSEDES ALL PRIOR AGREEMENTS. . . . . . . . . . . . . 41
     8.16 Controlling Provision Upon Conflict. . . . . . . . . . . . . . . . 41
     8.17 Time, Place and Method of Payments . . . . . . . . . . . . . . . . 41
     8.18 Counterpart Execution. . . . . . . . . . . . . . . . . . . . . . . 41
     8.19 Amended, Restated and Combined Agreement . . . . . . . . . . . . . 41

EXHIBITS

EXHIBIT A      Compliance Certificate
EXHIBIT B      Note
EXHIBIT C      Security Instruments
EXHIBIT D      Form of Request for Advance


SCHEDULES

1.01(a)        Borrowing Base Properties
3.16           Opinion of Borrower's Counsel
4.10           Purchasers of Production
4.12           Litigation

</TABLE>
                                     iii
<PAGE>

                 SECURED REDUCING REVOLVING CREDIT AGREEMENT

          THIS CREDIT AGREEMENT, is entered into as of the 17th day of 
December 1997, by and among MIDLAND RESOURCES, INC. ("MRI"), a Texas 
corporation, MIDLAND RESOURCES OPERATING COMPANY, INC., a Texas corporation, 
and SUMMIT PETROLEUM CORPORATION, a Colorado corporation (individually and 
collectively, "BORROWER"), and COMPASS BANK, a Texas chartered bank (the 
"BANK").

                                 W I T N E S S E T H

          WHEREAS, MRI is a party to that certain Credit Agreement dated 
October 31, 1996 with First Union National Bank of North Carolina (the "First 
Union Loan Agreement"); and

          WHEREAS, pursuant to Assignment of Notes and Liens of even date 
herewith, First Union National Bank of North Carolina ("First Union") has 
assigned to Bank all of First Union's right, title and interest in and to the 
First Union Loan Agreement, the Indebtedness of MRI to First Union arising 
thereunder, all liens and security interests securing such Indebtedness, and 
all documents and instruments executed and/or delivered pursuant thereto or 
in connection therewith (collectively the "First Union Loan Documents"); and

          WHEREAS, Borrower and Bank desire to enter into this Credit 
Agreement to amend and restate the First Union Loan Agreement; 

          NOW, THEREFORE, in consideration of the mutual covenants and 
agreements herein contained, and the mutual benefits to be derived herefrom, 
Bank and Borrower agree as follows:

                           ARTICLE I.  DEFINITIONS

          As used in this Agreement, the following terms shall have the 
meanings indicated:

          "AFFILIATE" means, as applied to any Person, any other Person, 
directly or indirectly, controlling, controlled by, or under common control 
with, that Person.  For purposes of this definition, "control" (including, 
with correlative meanings, the terms "controlling", "controlled by", and 
"under common control with"), as applied to any Person, means the possession, 
directly or indirectly, of the power to direct or cause the direction of the 
management and policies of that Person, whether through the ownership of 
voting securities, by contract, or otherwise.

          "AGREEMENT" means this Credit Agreement, as the same may be amended 
or supplemented from time to time.

          "BANK" has the meaning set forth in the preamble hereof.

                                       1
<PAGE>

          "BORROWER" has the meaning set forth in the preamble hereof.

          "BORROWING BASE" means the maximum loan amount supported by the 
Borrowing Base Properties, as determined by Bank from time to time in 
accordance with Section 2.10 of this Agreement.

          "BORROWING BASE PROPERTIES" means those Oil and Gas Properties of 
Borrower that are to be made subject to the liens created by certain of the 
Security Instruments to secure the Obligations, which initial Borrowing Base 
Oil and Gas Properties are described in Schedule 1.01(a) attached hereto and 
made a part hereof, together with such additional Oil and Gas Properties as 
are subsequently added to the Borrowing Base Properties pursuant to Section 
2.14.

          "BUSINESS DAY" shall mean: (a) for all purposes, a day other than a 
Saturday, Sunday or legal holiday for commercial banks under the laws of the 
State of Texas or the laws of the United States of America, and (b) in 
addition, for purposes of any LIBOR Loan, a day that satisfies the 
requirements of clause (a) and is a day on which commercial banks in London, 
England are open for domestic or international business.

          "COMPLIANCE CERTIFICATE" means the certificate of the president or 
vice president of Borrower required to be submitted to Bank from time to time 
pursuant to this Agreement, which certificate shall be in the form attached 
hereto as Exhibit "A." 

          "ENVIRONMENTAL LAWS" means (a) the following federal laws as they 
may be cited, referenced and amended from time to time: the Clean Air Act, 
the Clean Water Act, the Safe Drinking Water Act, the Comprehensive 
Environmental Response, Compensation and Liability Act, the Endangered 
Species Act, the Resource Conservation and Recovery Act, the Occupational 
Safety and Health Act, the Hazardous Materials Transportation Act, the 
Superfund Amendments and Reauthorization Act, and the Toxic Substances 
Control Act; (b) any and all environmental statutes of any state in which 
property of Borrower is situated, as they may be cited, referenced and 
amended from time to time; (c) any rules or regulations promulgated under or 
adopted pursuant to the above federal and state laws; and (d) any other 
federal, state or local statute or any requirement, rule, regulation, code, 
ordinance or order adopted pursuant thereto, including, without limitation, 
those relating to the generation, transportation, treatment, storage, 
recycling, disposal, handling or release of Hazardous Substances.

          "ERISA" means the Employee Retirement Income Security Act of 1974, 
as amended from time to time, and the regulations and published 
interpretations thereof.

                                       2
<PAGE>

          "ERISA AFFILIATE" means any trade or business (whether or not 
incorporated) which together with Borrower would be treated as a single 
employer under Section 4001 of ERISA.

          "EVENT OF DEFAULT" means any of the events specified in Section 
7.01 of this Agreement.

          "FIRST UNION" means First Union National Bank of North Carolina.

          "FIRST UNION LOAN AGREEMENT" has the meaning set forth in the 
recitations of this Agreement.

          "FIRST UNION LOAN DOCUMENTS" has the meaning set forth in the 
recitations of this Agreement.

          "FINANCIAL STATEMENTS" means the statements of the financial 
condition of the indicated Person, as at the point in time and for the period 
indicated and consisting of at least a consolidated balance sheet, income 
statement and statement of cash flows, and, when the foregoing are audited, 
accompanied by the certification of such Person's independent certified 
public accountants and footnotes to any of the foregoing, all of which shall 
be prepared in accordance with GAAP applied on a basis consistent with that 
of the preceding year.

          "FLOATING RATE" means the Index Rate in effect from time to time.

          "GAAP" means generally accepted accounting principles, applied on a 
consistent basis, as set forth in Opinions of the Accounting Principles Board 
of the American Institute of Certified Public Accountants and/or in 
statements of the Financial Accounting Standards Board and/or their 
respective successors and which are applicable in the circumstances as of the 
date in question. Accounting principles are applied on a "consistent basis" 
when the accounting principles observed in a current period are comparable in 
all material respects to those accounting principles applied in a preceding 
period.

          "HAZARDOUS SUBSTANCES" means flammables, explosives, radioactive 
materials, hazardous wastes, asbestos or any material containing asbestos, 
polychlorinated biphenyls (PCBs), toxic substances or related materials, 
petroleum and petroleum products and associated oil or natural gas 
exploration, production and development wastes or any substances defined as 
"hazardous substances", "hazardous materials", "hazardous wastes" or "toxic 
substances" under the Comprehensive Environmental Response, Compensation and 
Liability Act, as amended, the Superfund Amendments and Reauthorization Act, 
as amended, the Hazardous Materials Transportation Act, as amended, the 
Resource Conservation and Recovery Act, as amended, the Toxic Substances 
Control Act, as 

                                       3
<PAGE>

amended, or any other Environmental Laws now or hereafter enacted or 
promulgated by any regulatory authority or governmental body.

          "HEDGING TRANSACTION" means a swap, collar, floor, cap, forward, 
futures or other similar contract (including sales contracts for a term of 
greater than one year with fixed prices) entered into by Borrower with any 
other Person, which is intended to reduce or eliminate the risk of 
fluctuations in the price of oil or gas.  

          "INDEBTEDNESS" means, as to any Person, (a) all items of 
indebtedness or liability (other than capital, surplus, deferred credits and 
reserves, as such) which in accordance with GAAP would be included in 
determining total liabilities as shown on the liability side of a balance 
sheet as at the date as of which Indebtedness is to be determined, (b) 
indebtedness secured by any mortgage, pledge or lien existing on or 
encumbering property owned by the Person whose Indebtedness is being 
determined, whether or not the indebtedness secured thereby shall have been 
assumed, and (c) all indebtedness of others which such Person has directly or 
indirectly guaranteed, endorsed (otherwise than for collection or deposit in 
the ordinary course of business), discounted with recourse, agreed 
(contingently or otherwise) to purchase or repurchase or otherwise acquire, 
or in respect of which such Person has agreed to supply or advance funds 
(whether by way of loan, purchase of securities or capital contribution, 
through a commitment to pay for property or services regardless of the 
nondelivery of such property or the nonfurnishing of such services or 
otherwise), or in respect of which such Person has otherwise become directly 
or indirectly liable, contingently or otherwise, whether now existing or 
hereafter arising.

          "INDEX RATE" means, at any time, the prime rate established in THE 
WALL STREET JOURNAL'S "MONEY RATES" or similar table.  If multiple prime 
rates are quoted in the table, then the highest prime rate will be the Index 
Rate.  In the event that the prime rate is no longer published by THE WALL 
STREET JOURNAL in the "MONEY RATES" or similar table, then Bank may select an 
alternative published index based upon comparable information as a substitute 
Index Rate. Upon the selection of a substitute Index Rate, the applicable 
interest rate shall thereafter vary in relation to the substitute index.  
Such substitute index shall be the same index that is generally used as a 
substitute by Bank on all Index Rate loans.  The Index Rate is eight and 
one-half percent (8.50%) as of the date of this Agreement.

          "INDEX RATE LOAN" means any Loan for which interest thereon is to 
be computed at the Floating Rate in accordance with this Agreement.

          "INTEREST RATE(S)" means the Floating Rate or the LIBOR Rate, as 
applicable.

                                       4
<PAGE>

          "INTEREST PERIOD" means as to any LIBOR Loan the period commencing 
on and including the date of such Loan (or on the effective date of the 
election pursuant to Section 2.04(B) by which such Loan became a LIBOR Loan) 
and ending on and including the day preceding the same day (or if there is no 
such same day, the day preceding the last day) in the 1st, 2nd, or 3rd 
calendar month thereafter, as selected by the Borrower in accordance with 
Section 2.04(B), and thereafter such period commencing on and including the 
day immediately following the last day of the then ending Interest Period for 
such Loan and ending on and including the day preceding the day corresponding 
to the first day of such Interest Period (or if there is no such 
corresponding day, the day preceding the last day), in the 1st, 2nd or 3rd 
calendar month thereafter, as so selected by the Borrower; provided, however, 
that if any such Interest Period would otherwise end on a day prior to a day 
that is not a Business Day it shall be extended so as to end on the day prior 
to the next succeeding Business Day unless the same would fall in a different 
calendar month, in which case such Interest Period shall end on the day 
preceding the first Business Day preceding such next succeeding Business Day.

          "INVESTMENT" in any Person means any stock, bond, note or other 
evidence of Indebtedness or any other security (other than current trade and 
customer accounts) of, or loan to, such Person.

          "LEASES" means oil and gas leases and all oil, gas and mineral 
leases constituting any part of the Borrowing Base Properties.

          "LETTERS OF CREDIT" means letters of credit to be issued by the 
Bank for the account of the Borrower pursuant to Section 2.15, in the form 
acceptable to the Bank, and all extensions, renewals and modifications 
thereof.

          "LIBOR" means, in respect to any Interest Period, the rate per 
annum determined by the Bank to be the quotient of (a) the rate quoted, on an 
immediately available funds basis, to the Bank, at approximately 10:00 a.m. 
local time in Houston, Texas on the date one (1) Business Day prior to the 
first day of such Interest Period, for the offering by leading banks in the 
London interbank market of Dollars for deposit with the Bank for a period 
comparable to such Interest Period and in an amount comparable to the amount 
of the Loan determined by the Bank to be outstanding during such Interest 
Period and as to which the LIBOR Rate is to be determined, divided by (b) 
1.0, minus the Reserve Percentage expressed as a decimal, for such Interest 
Period.

          "LIBOR LOAN" means any Loan from time to time for which interest 
thereon is to be computed on the basis of the LIBOR Rate.

          "LIBOR RATE" means a rate per annum equal to the sum of LIBOR for 
the Interest Period for which interest is to be 

                                       5
<PAGE>

determined at the LIBOR Rate, PLUS two and one-half percent (2.5%) per annum.

          "LIMITATION PERIOD" means any period while any amount remains owing 
on the Note and interest on such amount calculated at the Floating Rate, plus 
any fees payable hereunder and deemed to be interest under applicable law, 
would exceed the Maximum Rate.

          "LOAN" means, singly, any advance by Bank to Borrower pursuant to 
this Agreement and "LOANS" means, cumulatively, the aggregate sum of all 
money advanced by Bank to Borrower pursuant to this Agreement.

          "LOAN DOCUMENTS" means this Agreement and all promissory notes, 
security agreements, guaranties, and other instruments, documents, and 
agreements executed and delivered pursuant to or in connection with this 
Agreement, as such instruments, documents, and agreements may be amended, 
modified, renewed, extended, or supplemented from time to time.

          "LOAN EXCESS" means, at any point in time, the amount, if any, by 
which the outstanding balance on the Loans evidenced by the Note plus the 
aggregate of the face amount of all outstanding Letters of Credit exceeds the 
Revolving Commitment then in effect.

          "MARKETABLE TITLE" means good and indefeasible title and ownership, 
free and clear of all mortgages, liens and encumbrances, except for Permitted 
Encumbrances.

          "MATURITY DATE" means December 1, 1999. 

          "MAXIMUM RATE" means the maximum non-usurious interest rate 
permissible under applicable laws of the State of Texas or those of the 
United States of America applicable to Bank.

          "MONTHLY BORROWING BASE REDUCTION" means the amount of the 
automatic monthly reduction to the Borrowing Base, as determined by Bank from 
time to time in accordance with Section 2.10 of this Agreement.

          "MRI" has the meaning set forth in the preamble of this Agreement.

          "MULTI-EMPLOYER PLAN" means a plan described in Section 4001(a)(3) 
of ERISA which covers employees of Borrower or any ERISA Affiliate.

          "NOTE" means that certain promissory note in the original face 
amount of $30,000,000.00, dated of even date herewith, made by Borrower 
payable to the order of Bank, in the form attached hereto as Exhibit "B," 
together with all deferrals, renewals, extensions, amendments, modifications 
or rearrangements thereof, which 

                                       6
<PAGE>

promissory note shall evidence the advances to Borrower by Bank pursuant to 
Section 2.01 hereof.

          "OBLIGATIONS" means all obligations, indebtedness, and liabilities 
of Borrower to Bank, now existing or hereafter arising, including, but not 
limited to, the indebtedness evidenced by the Note, whether direct, indirect, 
related, unrelated, fixed, contingent, specified, unspecified, joint, 
several, or joint and several, and all interest and fees accruing thereon and 
all attorneys' fees and other expenses incurred in the enforcement or 
collection thereof.

          "OIL AND GAS PROPERTIES" means fee, leasehold or other interests in 
or under mineral estates or oil, gas and other liquid or gaseous hydrocarbon 
leases with respect to properties situated in the United States, including, 
without limitation, overriding royalty and royalty interests, leasehold 
estate interests, net profits interests, production payment interests and 
mineral fee interests, together with all contracts executed in connection 
therewith, all oil, gas and other minerals produced and to be produced 
therefrom, all proceeds thereof, and all tenements, hereditaments, 
appurtenances and properties, real or personal, appertaining, belonging, 
affixed or incidental thereto.

          "PERMITTED ENCUMBRANCES" means:

          (A)  Liens for taxes, assessments, or similar charges, incurred in the
          ordinary course of business that are not yet due and payable;

          (B)  Liens of mechanics, materialmen, warehousemen, carriers, or other
          similar liens, securing obligations incurred in the ordinary course of
          business that are not yet due and payable;

          (C)  Encumbrances consisting of zoning restrictions, easements, or
          other restrictions on the use of real property, none of which
          materially impairs the use of such property by Borrower in the
          operation of its business, and none of which is violated in any
          material respect by existing or proposed operations;

          (D)  Liens in favor of Bank;

          (E)  The following, if the validity or amount thereof is being
          contested in good faith by appropriate and lawful proceedings, so long
          as levy and execution thereon have been stayed and continue to be
          stayed, and in Bank's sole judgment they do not, in the aggregate,
          materially detract from the value of the property of Borrower or any
          Subsidiary, or materially impair the use thereof in the operation of
          its business:

                                       7
<PAGE>

               (1)  Claims or liens for taxes, assessments, or similar charges;
               and

               (2)  Claims or liens of mechanics, materialmen, warehousemen,
               carriers, or other similar liens.

          "PERMITTED HEDGING TRANSACTIONS" means Hedging Transactions that: 
(a) encumber not more than seventy-five (75%) of Borrower's monthly 
production of proved producing reserves as forecast in the most recent 
engineering evaluation performed by Bank pursuant to Section 2.10; (b) are 
based upon strike prices equal to or higher than the prices utilized by Bank 
in its most recent engineering evaluation performed pursuant to Section 2.10; 
(c) are placed with a counter-party approved by Bank, in its sole discretion; 
and (d) in which Borrower's interest is pledged to Bank pursuant to a 
security agreement in form and substance satisfactory to Bank.

          "PERSON" means an individual, company, corporation, partnership, 
limited partnership, joint venture, trust, association, unincorporated 
organization or a government or any agency or political subdivision thereof.

          "PBGC" means the Pension Benefit Guaranty Corporation or any entity 
succeeding to any or all of its functions under ERISA.

          "PROHIBITED TRANSACTION" means any transaction set forth in Section 
406 of ERISA or Section 4975 of the Internal Revenue Code of 1954, as amended 
from time to time.

          "PROVED RESERVES" means the estimated quantities of crude oil, 
condensate, natural gas liquids and natural gas which geological and 
engineering data demonstrate with reasonable certainty to be recoverable by 
primary producing mechanisms in future years from known reservoirs underlying 
lands or interests therein constituting Oil and Gas Properties, under 
existing economic and operating conditions.  Reserves which can be produced 
economically through application of improved recovery techniques (e.g., fluid 
injection) will be included in Proved Reserves when successful testing by a 
pilot project or the operation of an installed program in the reservoir 
provides support for the engineering analysis on which the pilot project or 
installed program was based. In general, the economic productivity of the 
estimated proved reserves is supported by actual production or a conclusive 
formation test; however, in certain instances proved reserves are assigned to 
reservoirs on the basis of a combination of electrical and other type logs 
and core analyses which indicate these reservoirs are analogous to similar 
reservoirs in the same field which are producing or have demonstrated the 
ability to produce on a formation test.

          "REPORTABLE EVENT" means any of the events set forth in Section 
4043 of ERISA.

                                       8
<PAGE>

          "REQUEST FOR ADVANCE" means the written request by Borrower, signed 
by the president or any vice president of MRI, for an advance by Bank 
pursuant to this Agreement, which Request for Advance shall be in a form, and 
shall include the information and accompanying supporting documentation, as 
prescribed in Exhibit "D" attached hereto.  

          "REQUIRED NUMBER" means: in the case of notices hereunder (i) 
relative to borrowings, prepayments, elections of the LIBOR Rate, selections 
of Interest Periods for, or other transactions in respect of, LIBOR Loans:  
two (2) Business Days; or (ii) relative to all transactions in respect of 
Index Rate Loans:  one (1) Business Day; it being understood, however, that 
in the case of notices involving transactions in respect of more than one 
type of Loan (such as a change in type of Loan in accordance with Section 
2.04(B)), "Required Number" means that number of days, as indicated above in 
respect of the Loans involved, which would constitute the longest applicable 
period of time.

          "RESERVE PERCENTAGE" means for any Interest Period, the average 
(for such Interest Period) maximum rate at which reserves (including any 
marginal, supplemental, or emergency reserves) are required to be maintained 
during such Interest Period under Regulation D of the Federal Reserve Board 
by member banks of the Federal Reserve System as it applies to the Bank 
against "Eurocurrency liabilities" (as such term is used in Regulation D).  
Without limiting the effect of the foregoing, the Reserve Percentage shall 
reflect any other reserves required to be maintained by member banks by 
reason of any regulatory change against (i) any category of liabilities that 
includes deposits by reference to which the interest rate for LIBOR Loans is 
to be determined as provided in this Agreement or (ii) any category of 
extensions of credit or other assets that include LIBOR Loans.  As of the 
date of this Agreement the Reserve Percentage is zero.

          "REVOLVING COMMITMENT" means the obligation of Bank, subject to the 
provisions of this Agreement and existing only through the last Business Day 
prior to the Maturity Date, to advance to Borrower funds, not to exceed at 
any one time outstanding an amount equal to the lesser of: (a) Thirty Million 
Dollars ($30,000,000.00), or (b) the Borrowing Base then in effect.  

          "SECURITY INSTRUMENTS" means the security instruments described on 
Exhibit "C," in form and substance satisfactory to Bank, to be executed by 
Borrower pursuant to Section 3.14, and any and all other instruments or 
documents hereafter executed in connection with or as security for the 
payment of the Note.

          "SUBSIDIARY" means (a) any corporation in which Borrower, directly 
or indirectly through its Subsidiaries, owns more than fifty percent (50%) of 
the stock of any class or classes having by the terms thereof the ordinary 
voting power to elect a majority of the directors of such corporation; and 
(b) any partnership, 

                                       9
<PAGE>

association, joint venture, or other entity in which Borrower, directly or 
indirectly through its Subsidiaries, has more than a fifty percent (50%) 
equity interest at the time.

          "TANGIBLE NET WORTH" means the total assets of Borrower exclusive 
of (a) those assets classified as intangible, including, without limitation, 
goodwill, patents, trademarks, trade names, copyrights, franchises and 
deferred charges, (b) treasury stock and minority interests in any Person, 
(c) cash set apart and held in a sinking or other analogous fund established 
for the purpose of redemption or other retirement of capital stock, (d) to 
the extent not already deducted from total assets, allowances for 
depreciation, depletion, obsolescence and/or amortization of properties, 
uncollectible accounts, and contingent but probable liabilities as to which 
an amount can be established, (e) deferred taxes and (f) all assets arising 
from advances to officers, former officers or sales representatives of 
Borrower made outside of the ordinary course of business; less total 
liabilities of Borrower; all of the above being determined in accordance with 
GAAP.

          "UNMATURED EVENT OF DEFAULT" means any event or occurrence which 
solely with the lapse of time or the giving of notice or both will ripen into 
an Event of Default.

          Undefined financial accounting terms used in this Agreement shall 
be defined in accordance with GAAP.

                            ARTICLE II.  THE LOAN

          2.01 THE REVOLVING LINE.  Upon the terms and conditions (including, 
without limitation, the right of Bank to terminate the Revolving Commitment 
hereunder upon an Event of Default or an Unmatured Event of Default) and 
relying on the representations and warranties contained in this Agreement, 
Bank agrees, for a period from and after the date hereof through the last 
Business Day prior to the Maturity Date, to make advances for the account of 
Borrower from time to time following receipt of a Request for Advance; 
provided, however, that the aggregate principal amount of all Loans plus the 
aggregate face amount of all Letters of Credit at any one time outstanding 
shall not exceed the Revolving Commitment.

          Through the last Business Day prior to the Maturity Date, Borrower 
may use this revolving credit by borrowing, prepaying and reborrowing, all in 
accordance with the terms and conditions of this Agreement.  The borrowings 
made by Borrower pursuant to the Revolving Commitment shall be made at the 
principal office of Bank and shall be evidenced by the Note.  The entire 
principal amount of the Note is due on the Maturity Date.  Each Borrower, 
other than MRI, hereby appoints MRI as its agent and attorney-in-fact for 
purposes of submitting all Requests for Advance hereunder and for purposes of 
giving and receiving all notices and other communications permitted or 
required by this Agreement and either receiving or directing the disposition 
of all advances and letter 

                                      10
<PAGE>

of credit, respectively, made or issued by Bank pursuant to this Agreement.  
Each Borrower, other than MRI, hereby ratifies, adopts and confirms all acts 
heretofore or hereafter taken by MRI on behalf of such Borrower in connection 
with this Agreement and/or any of the other Loan Documents executed in 
connection herewith.

          2.02 ADVANCES AND PAYMENTS OF PRINCIPAL UNDER THE NOTE.  Each time 
an advance is made against or payment is made on the Note, Bank is hereby 
irrevocably authorized by Borrower to make appropriate entries of such in its 
records in accordance with the usual and customary practices of accounting 
for advances and payments on notes; provided, however, the failure of Bank to 
do so shall not relieve Borrower of its correct liability hereunder or under 
the Note.

          The aggregate unpaid amount of advances reflected by the notations 
by Bank on its records or the ledger sheets affixed to the Note shall be 
deemed rebuttably presumptive evidence of the principal amount owing on the 
Note.  The liability for payment of principal and interest evidenced by the 
Note shall be limited to principal amounts actually advanced to Borrower and 
outstanding under this Agreement and interest on such amounts calculated in 
accordance with this Agreement.  Interest provided for in the Note and herein 
shall be calculated on unpaid sums actually advanced and outstanding under 
the Note pursuant to the terms of this Agreement and only for the period from 
the date or dates of such advances until repayment.  

          2.03 PREPAYMENT AND CONVERSION.  Upon the Required Number of days 
notice to the Bank, the Borrower may: (a) without the payment of penalty or 
premium, prepay the principal of the Loans, or (b) voluntarily convert the 
applicable Interest Rate of any Loan prior to the termination of the 
applicable Interest Period in whole or in part, from time to time; any 
partial payment or conversion to be made in the sum of not less than $500,000 
or any $100,000 increment in addition thereto; PROVIDED that with respect to 
any such prepayment or conversion of any Loan upon which interest is being 
calculated at the LIBOR Rate the Borrower shall reimburse the Bank on demand 
for any costs, including administrative costs, incurred by the Bank as a 
result of such prepayment or conversion and any loss incurred or to be 
incurred by the Bank in the redeployment of the funds released by any such 
prepayment.  Such loss shall be the difference, as reasonably determined by 
Bank, between (i) Bank's gross return hereunder with respect to that portion 
of the Loans which is prepaid, based on the applicable Interest Rate for such 
portion of the Loans and (ii) any lesser amount realized by Bank in deploying 
the funds received in repayment, or otherwise realized from that portion of 
the Loans so prepaid, during the period from the date of the prepayment until 
the end of the Interest Period for that portion of the Loans prepaid; 
provided that Bank shall use its best efforts to redeploy such funds in a 
commercially reasonable manner.

                                      11
<PAGE>

          2.04 INTEREST RATE AND PAYMENTS OF INTEREST.

          (A)  Interest on Index Rate Loans shall be calculated on the basis of
          a year of 365 or 366 days, as appropriate.  Interest on LIBOR Loans
          shall be calculated on the basis of a 360-day year, counting the
          actual number of days elapsed.  Interest on the outstanding principal
          balance of the Loans shall accrue for each day at either the Floating
          Rate for such day or the LIBOR Rate for the Interest Period which
          includes such day, all as elected and specified (including
          specification as to length of Interest Period, as permitted by the
          definition of that term, with respect to any election of the LIBOR
          Rate) by the Borrower in accordance with Section 2.04(B); provided
          that:

               (i)  In the absence of an election by the Borrower of the LIBOR
               Rate, or, having made such election but upon the Required Number
               of days prior to the end of the then current Interest Period the
               Borrower fails or is not entitled under the terms of this
               Agreement to elect to continue such Interest Rate and specify the
               applicable Interest Period therefor, then upon the expiration of
               such then current Interest Period, interest on the Loans shall
               accrue for each day at the Floating Rate for such day, until the
               Borrower, pursuant to Section 2.04(B), elects a different
               Interest Rate and specifies the Interest Period for the Loans.

               (ii) Interest accruing on any LIBOR Loan during any Interest
               Period shall be payable on the last Business Day of such then
               current Interest Period; PROVIDED, that all accrued interest on
               any LIBOR Loan converted or prepaid pursuant to Section 2.03
               shall be paid immediately upon such prepayment or conversion.

          (B)  By at least the Required Number of days prior to the advance of
          any Loan hereunder, Borrower shall select the initial Interest Rate to
          be charged on such Loan, and from time to time thereafter the Borrower
          may elect, on at least the Required Number of days' irrevocable prior
          written (or telephoned, promptly confirmed by written) notice to the
          Bank, to change the Interest Rate on any Loan to any other Interest
          Rate (including, when applicable, the selection of the Interest
          Period); PROVIDED that; (i) the Borrower shall not select an Interest
          Period that extends beyond the Termination Date; (ii) except as
          otherwise provided in Section 2.03 no such change from the LIBOR Rate
          to another Interest Rate shall become effective on a day other than
          the day, which must be a Business Day, next following the last day of
          the 

                                      12
<PAGE>

          Interest Period last effective for such LIBOR Loan; (iii) any
          elections made by the Borrower pursuant to this Section 2.04(B) shall
          be in the amount of $100,000, plus any additional increment of
          $100,000; (iv) notwithstanding anything herein to the contrary, the
          Borrower may not make any election under this Section 2.04(B) that
          would result in Loans outstanding at more than three (3) different
          LIBOR Rates without the written agreement of the Bank to do so; and
          (v) the first day of each Interest Period as to a LIBOR Loan shall be
          a Business Day.

          (C)  Interest on Index Rate Loans shall be paid monthly in arrears on
          the first day of each calendar month commencing with any month during
          which interest begins to accrue at the Floating Rate, as elected by
          Borrower pursuant to Section 2.04(B), and on the date the principal of
          such Loans shall be due (at stated maturity, on acceleration, or
          otherwise).

          (D)  Interest on past-due principal shall accrue at the greater of the
          applicable Floating Rate plus three percent (3.00%) or LIBOR plus five
          percent (5.00%) until such principal is paid in full, and shall be
          payable upon demand by the Bank.

          (E)  The Bank shall notify the Borrower of the current Index Rate and
          of the current LIBOR Rate from time to time upon request by the
          Borrower.

          (F)  It is the intention of the parties hereto to conform strictly to
          applicable usury laws as in effect from time to time.  Accordingly, if
          any transactions contemplated hereby would be usurious under
          applicable Law (including the laws of the United States of America, or
          of any other jurisdiction whose laws may be mandatorily applicable),
          then, in that event, notwithstanding anything to the contrary in this
          Agreement, or any other agreement entered into in connection with this
          Agreement, it is agreed the aggregate of all consideration that
          constitutes interest under applicable law that is contracted for,
          charged, or received under this Agreement, or under any of the other
          aforesaid agreements or otherwise in connection with this Agreement
          shall under no circumstances exceed the Maximum Rate, and any excess
          shall be credited to the Borrower by Bank (or, if such consideration
          shall have been paid in full, such excess refunded to the Borrower by
          Bank).  All sums paid, or agreed to be paid, to the Bank for use,
          forbearance, and detention of the indebtedness of the Borrower by the
          Bank shall, to the extent permitted by applicable laws, be amortized,
          pro rated, allocated, and spread throughout the full term of such
          indebtedness 

                                      13
<PAGE>
          until such indebtedness is paid in full so that the actual rate of 
          interest is uniform, but does not exceed the Maximum Rate, 
          throughout the full term thereof.  If at any time the applicable 
          Interest Rate, which shall be deemed for purposes of this Section 
          2.04(F), only, to include any other fees, charges, or other forms 
          of consideration which constitute interest under applicable law 
          that is contracted for, charged, or received under this Agreement 
          or any other agreement entered into in connection with this 
          Agreement, exceeds the Maximum Rate, the rate of interest to accrue 
          pursuant to this Agreement shall be limited, notwithstanding 
          anything to the contrary in this Agreement, to the Maximum Rate, 
          but any subsequent reductions in the Interest Rate otherwise 
          provided for herein shall not reduce the interest to accrue 
          pursuant to this Agreement below the Maximum Rate until the total 
          amount of interest accrued pursuant to this Agreement equals the 
          amount of interest that would have accrued if a varying rate per 
          annum equal to the otherwise applicable Interest Rate had at all 
          times been in effect.  If the total amount of interest paid or 
          accrued pursuant to this Agreement under the foregoing provisions 
          is less than the total amount of interest that would have accrued 
          if a varying rate per annum equal to the otherwise applicable 
          Interest Rate had at all times been in effect, then the Borrower 
          agrees to pay upon final maturity of the Loans an amount equal to 
          the difference between (a) the lesser of (i) the amount of interest 
          that would have accrued if the Maximum Rate had at all times been 
          in effect or (ii) the amount of interest that would have accrued if 
          a varying rate per annum equal to the otherwise applicable Interest 
          Rate had at all times been in effect, and (b) the amount of 
          interest accrued in accordance with the other provisions of this 
          Agreement.

          2.05 INCREASED COST OF LOANS.

          (A)  Notwithstanding any other provisions herein, if as a result of
          any regulatory change

               (i)  the basis of taxation of payments to Bank of the principal
               of, or interest on, any LIBOR Loan or any other amounts due under
               this Agreement in respect of any such LIBOR Loan (except for
               taxes imposed on the overall net income or receipts of Bank, and
               franchise or other taxes imposed generally on Bank), by the
               jurisdiction (or any political subdivision therein) in which Bank
               has its principal office (if such other taxes do not specifically
               affect the cost to Bank of making the Loans) is changed;

                                      14
<PAGE>

               (ii)  any reserve, special deposit, or similar requirement
               (including without limitation any reserve requirement under
               regulations of the Board of Governors of the Federal Reserve
               System) against assets of, deposits with, or for the account of,
               or credit extended by Bank, is imposed, increased, modified, or
               deemed applicable; or 

               (iii)  any other condition affecting this Agreement or any LIBOR
               Loan is imposed on Bank or (in the case of LIBOR Loans) the
               London interbank market;

          and the result of any of the foregoing is to increase the actual
          direct cost to Bank of making or maintaining any such LIBOR Loan or to
          reduce the amount of any sum received by Bank hereunder in respect
          thereof (and such increase or reduction shall not have been
          compensated by a corresponding increase in the interest rate
          applicable to the respective Loans), by an amount deemed by Bank to be
          material (such increases in cost and reductions in amounts receivable
          being herein called "Increased Costs"), then the Borrower shall pay to
          Bank, within thirty (30) days after its demand, such additional amount
          or amounts as will compensate Bank for those Increased Costs.  The
          Bank will not demand to be compensated by Borrower for such Increased
          Costs unless the Bank generally makes such demands to its other LIBOR
          Loan customers who are similarly situated.  A certificate of Bank
          setting forth the basis for the determination of such amount necessary
          to compensate the Bank as aforesaid, accompanied by documentation
          showing reasonable support for such increased costs or reduced sums
          received by Bank, shall be delivered to the Borrower and shall be
          conclusive, save for manifest error, as to such determination and such
          amount.

          (B)  Notwithstanding the foregoing provisions of this Section 2.05, in
          the event that by reason of any regulatory change the Bank either
          (i) incurs Increased Costs based on, or measured by, the excess above
          a specified level of the amount of a category of deposits or other
          liabilities of Bank that includes deposits by reference to which the
          interest rate on LIBOR Loans is determined as provided in this
          Agreement or a category of extensions of credit or other assets of
          such Bank that includes LIBOR Loans or (ii) becomes subject to
          restrictions on the amount of such a category of liabilities or assets
          that it may hold, then, if Bank so elects by notice to the Borrower,
          the obligation of Bank to make or convert Loans of any other type into
          LIBOR Loans hereunder shall be suspended until the earlier of 

                                      15
<PAGE>

          the date such regulatory change ceases to be in effect or the date 
          the Borrower and Bank agree upon an alternative method of 
          determining the interest rate payable by the Borrower on LIBOR 
          Loans, and all LIBOR Loans of Bank then outstanding shall be 
          converted into an Index Rate Loan (if not otherwise prohibited 
          under the terms of this Agreement) at the Borrower's option.

          (C)  Bank agrees that upon the occurrence of any regulatory change
          giving rise to the operation of the first paragraph of this Section
          2.05, it will, if requested by the Borrower and to the extent
          permitted by law or by the relevant government authority, for a period
          of thirty (30) days endeavor in good faith to avoid or minimize the
          increase in cost or reduction in amount receivable resulting from such
          regulatory change; PROVIDED, however, that such change can be made in
          such a manner that Bank, in its sole determination, suffers no
          economic, legal, regulatory, or other disadvantage.  Any expense
          incurred by Bank in so doing shall be paid by the Borrower on delivery
          to the Borrower of a certificate as to the amount of such expense,
          which certificate shall be conclusive in the absence of manifest
          error.  Nothing in this paragraph shall affect or postpone the
          obligations of the Borrower set forth in any other paragraph of this
          Section 2.05.

          2.06 SUBSTITUTE RATE.  Anything herein to the contrary 
notwithstanding, if within two (2) Business Days prior to the first day of 
any Interest Period for a LIBOR Loan the Bank is not, for any reason 
whatsoever, quoted rates for the offering of Dollars for deposit with it in 
the London interbank market for a period and amount relevant to the 
computation of the rate of interest on LIBOR Loans for such Interest Period, 
the Bank shall give the Borrower prompt notice thereof and on what would 
otherwise be the first day of such Interest Period such Loans shall be made 
as Index Rate Loans (if not otherwise prohibited under the terms of this 
Agreement), at the Borrower's option in accordance with the election 
procedures set forth in Section 2.04(B); PROVIDED, however, that prior to the 
effective date of such election, interest shall be calculated at the Floating 
Rate.  

          2.07 CHANGE OF LAW.  Notwithstanding any other provision herein, in 
the event that any change in any applicable law, rule or regulation or in the 
interpretation or administration thereof shall make it unlawful for the Bank 
to (i) honor any commitment it may have hereunder to make any LIBOR Loan, 
then such commitment shall terminate, or (ii) maintain any LIBOR Loan, then 
all LIBOR Loans of the Bank then outstanding shall be repaid and converted to 
Index Rate Loans (if not otherwise prohibited under the terms of this 
Agreement) at the Borrower's option in accordance with the election 
procedures set forth in Section 2.04(B); PROVIDED, however, that prior to the 
effective date of such election, interest shall be

                                      16
<PAGE>

calculated at the Floating Rate.  Any remaining commitment of Bank hereunder 
to make LIBOR Loans (but not other Loans) shall terminate forthwith.  Upon 
the occurrence of any such change, the Bank shall promptly notify the 
Borrower thereof, and shall furnish to the Borrower in writing evidence 
thereof certified by the Bank.

          Any repayment or conversion of any LIBOR Loan which is required 
under this Section 2.07 or under 2.05(B) shall be effected by payment 
thereof, together with accrued interest thereon, on demand, and concurrently 
there shall occur the borrowing of the corresponding Index Rate Loan as 
provided herein.

          If any repayment to Bank of any LIBOR Loan (including conversions 
thereof) is made under this Section 2.07 on a day other than a day otherwise 
scheduled for a payment of principal of or interest on such Loan, the 
Borrower shall pay to Bank upon its request such amount or amounts as will 
compensate it for the amount by which the rate of interest on such Loan 
immediately prior to such repayment exceeds the stated rate of interest on 
relending or reinvesting the funds received in connection with such 
prepayment, in each case for the period from the date of such prepayment to 
the Business Day next succeeding the last day of such then current Interest 
Period, all as determined by Bank in its good faith discretion.

          2.08  ADVANCES TO SATISFY OBLIGATIONS OF BORROWER.  Bank may, but 
shall not be obligated to, make advances hereunder and apply same to the 
satisfaction of any condition, warranty, representation or covenant of 
Borrower contained in this Agreement, and the funds so advanced and applied 
shall be part of the Loan proceeds advanced under this Agreement and 
evidenced by the Note.

          2.09  MANDATORY PREPAYMENT OF THE NOTES.  In the event that Bank or 
Borrower determine that a Loan Excess exists, Borrower shall immediately, but 
in no event later than thirty (30) days following the earlier of either: (a) 
Borrower becoming aware that a Loan Excess exists, or (b) notice from Bank of 
any such determination, (i) prepay the principal of the Note in an aggregate 
amount at least equal to such Loan Excess or (ii) add to the Borrowing Base 
Properties additional Oil and Gas Properties of Borrower sufficient in value, 
as determined by Bank in its sole discretion pursuant to Section 2.10, to 
increase the Borrowing Base to equal the unpaid principal amount of the Note 
plus all accrued, unpaid interest.

          2.10  BORROWING BASE DETERMINATION.

                a.  BORROWING BASE PROPERTIES.  The initial Borrowing Base 
attributable to the Borrowing Base Properties is hereby established at 
$10,500,000.00 effective as of the date hereof.  Subject to the other 
provisions of this Agreement, the Borrowing Base shall be automatically 
reduced on the first day of each month, commencing on February 1, 1998, by 
the Monthly

                                      17
<PAGE>

Borrowing Base Reduction, which is initially established at $120,000.00.  On 
or before April 1, 1998, Borrower shall furnish to Bank a petroleum 
engineering report relative to the Proved Reserves that are attributable to 
the Borrowing Base Properties effective as of January 1, 1998, as well as 
such other information as Bank may request regarding volumes of production 
produced and sold, contracts, pricing, gross revenues, expenses, and other 
information and engineering and geological data as may relate to the 
Borrowing Base Properties (collectively the "Borrowing Base Property Data").  
Upon receipt of such Borrowing Base Property Data, Bank shall, in the normal 
course of business, redetermine the Borrowing Base and the Monthly Borrowing 
Base Reduction attributed to the Borrowing Base Properties, which 
redetermination shall become effective upon written notification from Bank to 
Borrower, and which, subject to the other provisions of this Agreement, shall 
be the basis on which the Borrowing Base shall thereafter be calculated until 
the effective date of the next redetermination of the Borrowing Base and the 
Monthly Borrowing Base Reduction as set forth in this Section.  Thereafter, 
on or before each succeeding October 1 and April 1 until the Maturity Date, 
Borrower shall furnish to Bank a report, in form and substance satisfactory 
to Bank, which report shall set forth, as of each preceding July 1 or January 
1, as applicable, such Borrowing Base Property Data as Bank may request 
attributable to the Borrowing Base Properties.  Each report to be provided on 
or before each April 1 shall be a complete report relating to the Borrowing 
Base Properties, which may be prepared by Borrower, but which shall be 
reviewed and concurred with in writing by an independent petroleum engineer 
or firm of engineers satisfactory to Bank. Each report to be provided on or 
before each October 1 shall simply update the previous complete report, and 
may be prepared by Borrower's own engineers and shall be certified by the 
President of MRI.  Upon receipt of each such report, Bank shall, in the 
normal course of business, make a determination of the Borrowing Base and the 
Monthly Borrowing Base Reduction which shall become effective upon written 
notification from Bank to Borrower, and which, subject to the other 
provisions of this Agreement, shall be the basis on which the Borrowing Base 
attributable to the Borrowing Base Properties shall thereafter be calculated 
until the effective date of the next redetermination of the Borrowing Base 
and the Monthly Borrowing Base Reduction as set forth in this Section.  

          Beginning with the delivery of the Borrowing Base Property Data due 
by April 1, 1998, and continuing as and when Borrower is required to provide 
to Bank each semi-annual report, as required by the provisions of this 
Section, Borrower shall contemporaneously pay an engineering fee of $7,500.00 
to Bank for Bank's analysis of such report and redetermination of the 
Borrowing Base and the Monthly Borrowing Base Reduction.  At any time 
engineering reviews are requested by Borrower in connection with a Borrowing 
Base redetermination, other than the semi-annual reviews required by Bank, an 
additional fee of $7,500.00 shall be paid to

                                       18
<PAGE>

Bank for Bank's analysis of such report and redetermination of the Borrowing 
Base.

                b.  EQUITY CUSHION.  The Borrowing Base shall represent 
Bank's determination, in accordance with its customary lending practices in 
effect from time to time, of the maximum loan amount that may be supported by 
the Borrowing Base Properties.  Borrower and Bank acknowledge that (i) due to 
the uncertainties of the oil and gas extraction process, the Borrowing Base 
Properties are not subject to evaluation with a high degree of accuracy and 
are subject to potential rapid deterioration in value, and (ii) for this 
reason and the difficulties and expenses involved in liquidating and 
collecting against the Borrowing Base Properties, Bank's determination of the 
maximum loan amount with respect to the Borrowing Base Properties contains an 
equity cushion, which equity cushion is acknowledged by Borrower as essential 
for the adequate protection of Bank.

                c.  UNSCHEDULED BORROWING BASE REDETERMINATIONS.  In addition 
to scheduled redeterminations of the Borrowing Base, the Bank may redetermine 
the Borrowing Base and the Monthly Borrowing Base Reduction at any time, and 
from time to time, which redetermination shall become effective upon written 
notification from Bank to Borrower and which, subject to the other provisions 
of this Agreement, shall be the basis on which the Borrowing Base shall 
thereafter be calculated until the effective date of the next redetermination 
of the Borrowing Base and the Monthly Borrowing Base Reduction, as set forth 
in this Section.

          2.11  ASSIGNMENT OF PRODUCTION.  Certain of the Security 
Instruments covering the Borrowing Base Properties contain an assignment unto 
and in favor of Bank of all oil, gas and other minerals produced and to be 
produced from or attributable to the Oil and Gas Properties that constitute 
part of the Borrowing Base Properties, together with all of the revenues and 
proceeds attributable to such production, and such Security Instruments 
further provide that all such revenues and proceeds which may be so collected 
by Bank pursuant to the assignment shall be applied to the payment of the 
Note and the satisfaction of all other Indebtedness to be secured by such 
Security Instruments.  Such Security Instruments further provide that the 
Bank grants to Borrower a license to receive and collect the revenues and 
proceeds attributable to such production unless and until an Event of Default 
shall occur, and upon the occurrence of an Event of Default, the Bank, acting 
in its sole discretion, shall have the right to terminate Borrower's license 
to collect such revenues and proceeds.  Borrower hereby appoints Bank as its 
agent and attorney-in-fact for all purposes deemed by Bank to be necessary or 
desirable in connection with such assignment of production, including, but 
not limited to, completing the letter transfer orders delivered to Bank 
pursuant to Sections 3.14 and/or 3.17 hereof, which power is coupled with an 
interest and is not revocable.

                                       19
<PAGE>

          2.12  COMMITMENT FEE.  As consideration for the commitment of Bank 
to make Loans to Borrower through the Maturity Date pursuant to this 
Agreement, Borrower agrees to pay to Bank within five (5) Business Days of 
receipt of Bank's statement as to quarterly periods ending March 31, June 30, 
September 30 and December 31 of each year (except the first period shall be 
for a period of time from the Closing to December 31, 1997) during the period 
commencing on the date of this Agreement to and including the Maturity Date 
and at the Maturity Date, a fee equal to 1/2 of 1% per annum (computed on the 
basis of 365 or 366 days, as the case may be) multiplied by an amount equal 
to the daily average excess, if any, of the Borrowing Base over the sum of: 
(x) the aggregate principal amount outstanding on the Note, plus (y) the 
aggregate face amount of all outstanding Letters of Credit, throughout the 
period from the date of this Agreement or previous calculation date provided 
above, whichever is later, to the relevant calculation date or the Maturity 
Date, as the case may be.

          2.13  FACILITY FEE.  As consideration for the commitment of Bank to 
make Loans to Borrower pursuant to this Agreement, Borrower shall pay to Bank 
at Closing a fee ("FACILITY FEE") equal to one-half of one percent (.5%) of 
the initial Revolving Commitment, and if and when the Revolving Commitment is 
subsequently increased, then Borrower shall pay to Bank an additional 
Facility Fee equal to one half of one percent (.5%) of the amount by which 
such increased Revolving Commitment exceeds the highest Revolving Commitment 
amount previously in effect.  

          2.14  ADDITION OF BORROWING BASE PROPERTIES.  Borrower may, from 
time to time upon thirty (30) days prior written notice to Bank, propose to 
add Oil and Gas Properties of Borrower to the Borrowing Base Properties.  Any 
such proposal to add Oil and Gas Properties of Borrower to the Borrowing Base 
Properties shall be accompanied by an engineering report applicable to such 
Oil and Gas Properties that conforms to the requirements of Section 2.10, 
evidence sufficient to establish that Borrower has Marketable Title to such 
Oil and Gas Properties, and such other data as Bank may reasonably request.  
Any such additions shall become effective at such time as: (a) Bank has made 
its determination in the ordinary course of business of the amount by which 
the Borrowing Base would be increased as the result of such addition and (b) 
the conditions set forth in Article III hereof, to the extent they are 
applicable to such additional Borrowing Base Properties of Borrower, have 
been satisfied.

          2.15  LETTERS OF CREDIT.  Subject to the terms and conditions of 
this Agreement, the Bank agrees to issue standby Letters of Credit for the 
account of the Borrower from time to time following receipt of a Request for 
Advance three (3) Business Days prior to the requested date of issuance in 
such amount as the Borrower may request in an aggregate amount of up to (i) 
One Million Dollars ($1,000,000.00), but (ii) not to exceed at any time the 
unborrowed portion of the Revolving Commitment.  The amount of

                                       20
<PAGE>

any such Letters of Credit issued under the Revolving Commitment shall be 
deemed to be a Loan and to reduce the amount available under the Revolving 
Commitment and shall be governed by the terms of this Agreement.  The Bank 
may require in connection with the issuance of any Letter of Credit that 
Borrower execute the Bank's then-current form of application for a Letter of 
Credit, but if there is any conflict between the terms of any such 
application and the terms of this Agreement, the terms of this Agreement 
shall control.  No Letter of Credit shall have an expiration date that is 
later than one year from the date of its issuance, or, if sooner, beyond the 
Maturity Date.

          2.16  REPAYMENT OF LETTERS OF CREDIT.  If drawn upon by the 
beneficiary of a Letter of Credit, all amounts so drawn shall be due and 
payable by the Borrower immediately upon receipt of Bank's statement therefor.

          2.17  LETTER OF CREDIT FEE.  As consideration for the issuance by 
the Bank of Letters of Credit for the account of the Borrower, the Borrower 
agrees to pay to the Bank a fee of one and one-half percent (1.5%), per 
annum, of the amount of each such Letter of Credit (subject to a $500.00 
minimum fee per year on each Letter of Credit), the first such per annum fee 
for each Letter of Credit to be payable in advance of the issuance of such 
Letter of Credit, with successive per annum fees to be paid in advance of the 
anniversary date of the issuance of such Letter of Credit if it is to remain 
in effect beyond such anniversary date.

                           ARTICLE III.  CONDITIONS

          The obligation of Bank to make advances of the Loans and/or to 
issue Letters of Credit referred to in Article II of this Agreement is 
subject to the prior or contemporaneous satisfaction of the following 
conditions precedent stated in this Article III.  

          3.01  RECEIPT OF NOTE, AGREEMENT AND CERTIFICATE OF COMPLIANCE.  
Bank shall have received the Note, multiple counterparts of this Agreement, 
as requested by Bank, and the Certificate of Compliance duly executed by an 
authorized officer for Borrower.

          3.02  ASSIGNMENTS OF FIRST UNION LOAN DOCUMENTS.  Bank shall have 
received an Assignment of Notes and Liens from First Union pursuant to which 
First Union has assigned to Bank all rights, titles and interests in and to 
the First Union Loan Documents, on terms and conditions satisfactory to Bank 
in its sole discretion, in consideration of a payment by Bank to First Union 
of the cash sum of not more than $9,151,614.58, which shall constitute an 
advance by Bank pursuant to and evidenced by the Note.

                                       21
<PAGE>

          3.03  RECEIPT OF ORGANIZATIONAL DOCUMENTS.  Bank shall have 
received from each Borrower its Articles of Incorporation and its bylaws, 
certified as being true and correct by the secretary or an assistant 
secretary of each respective Borrower.

          3.04  RECEIPT OF CERTIFIED COPY OF CORPORATE PROCEEDINGS AND 
CERTIFICATES OF INCUMBENCY.  Bank shall have received from Borrower copies of 
all resolutions of its board of directors authorizing the transactions set 
forth in this Agreement, and the execution of this Agreement, the Note, and 
those of the Security Instruments to which it is a party, such copy or copies 
to be certified by the secretary or an assistant secretary as being true and 
correct and in full force and effect as of the date hereof.  In addition, 
Bank shall have received from each Borrower a certificate of incumbency 
signed by the secretary or an assistant secretary of such Borrower setting 
forth (a) the names of the officers executing this Agreement, the Note, and 
those of the Security Instruments to which it is a party, (b) the office(s) 
to which such Persons have been elected and in which they presently serve and 
(c) an original specimen signature of each such person.

          3.05  RECEIPT OF CERTIFICATES OF AUTHORITY AND CERTIFICATES OF GOOD 
STANDING.  Bank shall have received certificates, as of the most recent dates 
practicable, of the Secretary of State of the state in which each Borrower is 
incorporated attesting to such Borrower's existence, and of each state in 
which such Borrower is qualified to do business as a foreign corporation 
attesting to such qualification, and from the department of revenue or 
taxation of each of the foregoing states, as to the good standing of such 
Borrower;

          3.06  UCC SEARCH.  Bank shall have received the results of a 
Uniform Commercial Code search showing all financing statements and other 
documents or instruments on file against each Borrower in the Offices of the 
Secretaries of State of the State of Texas and in the counties in which 
Borrowing Base Properties are located, such search to be as of a date no more 
than ten (10) days prior to the date of the Closing.

          3.07  FEES.  Bank shall have contemporaneously received the fee 
required by Section 2.13.

          3.08  FINANCIAL STATEMENTS.  Bank shall have received the Financial 
Statements of Borrower as of September 30, 1997, showing financial 
information consistent with that previously provided to Bank.

          3.09  REQUEST FOR ADVANCE.  Bank shall have received from Borrower 
a Request for Advance.

          3.10  ACCURACY OF REPRESENTATIONS AND WARRANTIES AND NO EVENT OF 
DEFAULT.  The representations and warranties contained in Article IV of this 
Agreement shall be true and correct in all

                                       22
<PAGE>

material respects on the date of the making of such Loans or advances with 
the same effect as though such representations and warranties had been made 
on such date; and no Event of Default shall have occurred and be continuing 
or will have occurred at the completion of the making of such Loans or 
advances.

          3.11  LEGAL MATTERS SATISFACTORY TO COUNSEL TO BANK.  All legal 
matters incident to the consummation of the transactions hereby contemplated 
shall be satisfactory to counsel for Bank.

          3.12  NO MATERIAL ADVERSE CHANGE.  No material adverse change shall 
have occurred since the date of this Agreement in the condition, financial or 
otherwise, of Borrower.

          3.13  STATUS OF TITLE.  Bank shall have been satisfied that 
Borrower has Marketable Title to its Borrowing Base Properties, and that 
Borrower owns record title to an undivided net revenue interest in the 
production from each Oil and Gas Property that is a Borrowing Base Property 
that is not less than the net revenue interest therein attributed to Borrower 
in the Loan Documents, as amended from time to time, as well as an undivided 
working interest in each such Oil and Gas Property that is not greater than 
the working interest therein attributed to Borrower in the Loan Documents, as 
amended from time to time (unless there is a corresponding increase in the 
net revenue interest attributed to such party therein).

          3.14  SECURITY INSTRUMENTS.  As security for the payment of the 
Note and the performance of the Obligations of Borrower under this Agreement, 
Bank shall have received the Security Instruments, duly executed by Borrower.

          3.15  LEGAL FEES.  All legal fees and disbursements owed to Bank's 
special counsel who provided representation to the Bank in connection with 
this Agreement or any amendment hereto and in connection with the review of 
title to the Borrowing Base Properties shall have been paid.

          3.16  OPINION OF COUNSEL FOR BORROWER.  Bank shall have received an 
opinion of counsel for Borrower regarding the matters set forth on Schedule 
3.16 attached to this Agreement, in form and substance satisfactory to Bank, 
subject to such customary assumptions, exceptions and qualifications as may 
be acceptable to Bank, in its discretion.

          3.17  DOCUMENTS REQUIRED FOR SUBSEQUENT DISBURSEMENTS.  As of the 
time of funding any additional advances to Borrower that are made in 
conjunction with the addition of any new Borrowing Base Properties owned by 
Borrower, Borrower shall have duly delivered to Bank: (i) the Security 
Instruments that are necessary or appropriate, in the opinion of Bank, 
relating to such additional Borrowing Base Properties, and (ii) Transfer 
Order Letters

                                       23
<PAGE>

applicable to the production of oil and gas from any additional Oil and Gas 
Properties added to the Borrowing Base Properties.

                 ARTICLE IV.  REPRESENTATIONS AND WARRANTIES

          To induce Bank to enter into this Agreement and to make the Loan 
hereunder, each Borrower represents and warrants to Bank (which 
representations and warranties will survive the delivery of the Note) that:

          4.01  EXISTENCE AND GOOD STANDING.  Borrower is a corporation, duly 
organized, legally existing and in good standing under the laws of its 
jurisdiction of incorporation and is duly qualified and in good standing as a 
foreign corporation in all jurisdictions wherein the property owned or the 
business transacted by it makes such qualification necessary, other than 
those jurisdictions wherein the failure to so qualify does not have a 
material adverse effect on Borrower.

          4.02  DUE AUTHORIZATION.  The execution and delivery by Borrower of 
this Agreement and the borrowings hereunder; the execution and delivery by 
Borrower of the Note and the Security Instruments; and the repayment by 
Borrower of Indebtedness evidenced by the Note and interest and fees provided 
in the Note and this Agreement are (a) within the corporate power of 
Borrower; (b) have been duly authorized by all necessary corporate action; 
and (c) do not and will not (i) require the consent of any regulatory 
authority, governmental body, or any other Person, (ii) violate any provision 
of law, the certificate of incorporation, the articles of incorporation, or 
the bylaws of Borrower, (iii) cause a default to occur under the terms and 
provisions of any indenture, instrument or other agreement to which Borrower 
is a party or by which its property may be presently bound or encumbered, or 
(iv) result in or require the creation or imposition of any mortgage, lien, 
pledge, security interest, charge or other encumbrance in, upon or of any of 
the properties or assets of Borrower under any such indenture, instrument or 
other agreement, other than under any of the Security Instruments.

          4.03  VALID AND BINDING OBLIGATIONS.  This Agreement, the Note, and 
the Security Instruments are the legal, valid and binding obligations of and 
enforceable against Borrower in accordance with their respective terms 
(subject to any applicable bankruptcy, insolvency or other laws of general 
application affecting creditors' rights and judicial decisions interpreting 
any of the foregoing).  In addition, the First Union Loan Agreement, the 
First Union Loan Documents, and the Indebtedness evidenced thereby, are the 
legal, valid and binding obligations of each Borrower that is party thereto 
in accordance with their respective terms (subject to any applicable 
bankruptcy, insolvency or other laws of general application affecting 
creditors' rights and judicial decisions interpreting any of the foregoing), 
and Borrower is not in default in any material respect of any of its 
obligations under the First

                                       24
<PAGE>

Union Loan Documents, and has no defenses to the obligation to repay or 
perform, respectively, any of the Indebtedness of other obligations evidenced 
thereby.

          4.04  TITLE TO BORROWING BASE PROPERTIES.  Borrower has Marketable 
Title to all of its Borrowing Base Properties.

          4.05  OIL AND GAS LEASES.  The Leases which constitute any part of 
the Borrowing Base Properties are in full force and effect, are valid, 
subsisting leases covering the entire estates to which they pertain and all 
rentals, royalties and other amounts due and payable in accordance with the 
terms of the Leases, overriding royalties, net profits or other production 
burdens have been duly paid or provided for; the obligations to be performed 
under the Leases have been duly performed; and Borrower is not aware of any 
default by any third party under any of the Leases with respect to such third 
party's obligations.

          4.06  INTEREST IN THE BORROWING BASE PROPERTIES.  With respect to 
each of the Borrowing Base Properties, the ownership of Borrower in such 
property will, with respect to the wells, units and/or tracts of land 
described in Schedule 1.01(a) hereto in connection with such property, (i) 
entitle Borrower to receive (subject to the terms and provisions of this 
Agreement) a decimal share of the oil and gas produced from, or allocated to, 
such wells, units and/or tracts equal to not less than the decimal share set 
forth in Schedule 1.01(a) in connection with such wells, units and/or tracts, 
and (ii) cause Borrower to be obligated to bear a decimal share of the cost 
of exploration, development and operation of such wells, units and/or tracts 
of land not greater than the decimal share set forth in Schedule 1.01(a) in 
connection with such wells, units and/or tracts, unless any increase in 
Borrower's share of costs is accompanied by a pro-rata increase in Borrower's 
share of revenue.  Except as set forth in the instrument and agreements, if 
any, more particularly described in Schedule 1.01(a), all such shares of 
production which Borrower is entitled to receive, and shares of expenses 
which Borrower is obligated to bear, are not subject to change, except for 
changes attributable to future elections by Borrower not to participate in 
operations proposed pursuant to customary forms of applicable joint operating 
agreements, and except for changes attributable to changes in participating 
areas under any federal units wherein participating areas may be formed, 
enlarged or contracted in accordance with the rules and regulations of the 
applicable governmental authority.

          4.07  OIL AND GAS CONTRACTS.  Borrower is not obligated, by virtue 
of any prepayment under any contract providing for the sale by Borrower of 
hydrocarbons which contains a "take-or-pay" clause or under any similar 
prepayment agreement or arrangement, including, without limitation, "gas 
balancing agreements", to deliver a material amount of hydrocarbons produced 
from the Borrowing Base Properties at some future time without then or 
thereafter receiving full payment therefor (I.E., in the case of

                                       25
<PAGE>

oil, not in excess of sixty (60) days, and in the case of gas, not in excess 
of ninety (90) days).  The Borrowing Base Properties are not subject to any 
contractual, or other arrangement for the sale of crude oil which cannot be 
cancelled on ninety (90) days' (or less) notice, unless the price provided 
for therein is equal to or greater than the prevailing market price in the 
vicinity.  The Borrowing Base Properties are not subject to any gas sales 
contract that contains any material terms which are not customary in the 
industry within the region in which the Borrowing Base Properties affected 
thereby are located.  The Borrowing Base Properties are not subject to any 
regulatory refund obligation and no facts exist which might cause the same to 
be imposed.

          4.08  PRODUCING WELLS.  All producing wells located on the 
Borrowing Base Properties have been, during all times that such were under 
the direction or control of Borrower and, to the knowledge of Borrower, at 
all other times, drilled, operated and produced in conformity with all 
applicable laws, rules, regulations and orders of all regulatory authorities 
having jurisdiction, are subject to no penalties on account of past 
production, and are bottomed under and are producing from, and the well bores 
are wholly within, the Borrowing Base Properties or on Oil and Gas Properties 
which have been pooled, unitized or communitized with the Borrowing Base 
Properties.

          4.09  PURCHASERS OF PRODUCTION.  The persons who are purchasing 
Borrower's interests in oil and gas produced from the Borrowing Base 
Properties as of the calendar month during which the Loans are made hereunder 
are identified on Schedule 4.09 attached hereto.

          4.10  SCOPE AND ACCURACY OF FINANCIAL STATEMENTS.  All Financial 
Statements submitted and to be submitted to Bank hereunder are and will be 
complete and correct in all material respects; are and will be prepared in 
accordance with GAAP and practices consistently applied; and do and will 
fairly reflect the financial condition and the results of the operations of 
Borrower in all material respects as of the dates and for the period stated 
therein (subject only to normal year-end audit adjustments with respect to 
such unaudited interim statements); and no material adverse change has since 
occurred in the condition, financial or otherwise, of Borrower or its 
Subsidiaries (taken as a whole).

          4.11  LIABILITIES, LITIGATION AND RESTRICTIONS.  Except as 
disclosed in the Financial Statements, Borrower has no liabilities, direct or 
contingent, which may materially and adversely affect its business or assets. 
Except as described on the Financial Statements or on Schedule 4.11, there is 
no litigation or other action of any nature pending before any court, 
governmental instrumentality, regulatory authority or arbitral body or, to 
the knowledge of Borrower, threatened against or affecting Borrower, or any 
of its Subsidiaries, which might reasonably be expected to result in any 
material, adverse change in the business

                                       26
<PAGE>

or assets of Borrower or its Subsidiaries (taken as a whole).  No unusual or 
unduly burdensome restriction, restraint or hazard exists by contract, law, 
governmental regulation or otherwise relative to the business or material 
properties of Borrower other than such as relate generally to Persons engaged 
in the business activities conducted by Borrower.

          4.12  MARGIN STOCK.  None of the proceeds of the Loans will be used 
for the purpose of buying or carrying margin stock.

          4.13  AUTHORIZATIONS AND CONSENTS.  No authorization, consent, 
approval, exemption, franchise, permit or license of, or filing with, any 
governmental or public authority or any third party is required to authorize, 
or is otherwise required in connection with the valid execution and delivery 
by Borrower of this Agreement, the Note, and the Security Instruments to 
which it is a party or any instrument contemplated hereby, the repayment by 
Borrower of advances against the Note and interest and fees provided in the 
Note and this Agreement, or the performance by Borrower of its obligations 
under any of the foregoing.

          4.14  COMPLIANCE WITH LAWS, RULES, REGULATIONS AND ORDERS.  To the 
best of the knowledge and belief of Borrower, neither the business nor any of 
the activities of Borrower, as presently conducted, violates any law or any 
rule, regulation or directive of any applicable judicial, administrative or 
other governmental instrumentality (including, but not by way of limitation, 
any law or any rule, regulation or directive of any judicial, administrative 
or other governmental instrumentality relating to zoning, to any 
Environmental Law, to the stabilization of wages or prices or to the 
development, production, transportation or purchase or sale of oil, gas or 
other hydrocarbons) the result of which violation would have a material 
adverse effect on Borrower or its Subsidiaries (taken as a whole), and 
Borrower possesses all licenses, approvals, registrations, permits and other 
authorizations necessary to enable it to carry on its business in all 
material respects as now conducted, and all such licenses, approvals, 
registrations, permits and other authorizations are in full force and effect; 
and Borrower has no reason to believe that it will be unable to obtain the 
renewal of any such licenses, approvals, registrations, permits and other 
authorizations.

          4.15  PROPER FILING OF TAX RETURNS AND PAYMENT OF TAXES DUE.  
Borrower has duly and properly filed all United States Income Tax returns and 
all other tax returns which are required to be filed, and has paid all taxes 
due pursuant to said returns or pursuant to any assessment received, except 
such taxes, if any, as are being contested in good faith and as to which 
adequate provisions and disclosures have been made; and the respective 
charges and reserves on the books of Borrower with respect to any taxes or 
other governmental charges are adequate.

                                       27
<PAGE>

          4.16  ERISA.  Borrower is in compliance in all material respects 
with all applicable provisions of ERISA.  Neither a Reportable Event nor a 
Prohibited Transaction has occurred and is continuing with respect to any 
plan; no notice of intent to terminate a plan has been filed, nor has any 
plan been terminated; no circumstances exist which constitute grounds under 
Section 4042 of ERISA entitling the PBGC to institute proceedings to 
terminate, or appoint a trustee to administrate a plan, nor has the PBGC 
instituted any such proceedings; neither Borrower nor any ERISA Affiliate has 
completely or partially withdrawn under Sections 4201 or 4204 of ERISA from a 
Multi-employer plan; Borrower and each ERISA Affiliate have met their minimum 
funding requirements under ERISA with respect to all of their plans and the 
present value of all vested benefits under each plan exceeds the fair market 
value of all plan assets allocable to such benefits, as determined on the 
most recent valuation date of the plan and in accordance with the provisions 
of ERISA and the regulations thereunder for calculating the potential 
liability of Borrower or any ERISA Affiliate to the PBGC or the plan under 
Title IV of ERISA; and neither Borrower nor any ERISA Affiliate has incurred 
any liability to the PBGC under ERISA.

          4.17  INVESTMENT COMPANY ACT COMPLIANCE.  Borrower is not, nor is 
it directly or indirectly controlled by or acting on behalf of any person or 
entity which is, an investment company or an "affiliated person" of an 
investment company within the meaning of the Investment Borrower Act of 1940.

          4.18  PUBLIC UTILITY HOLDING COMPANY ACT COMPLIANCE.  Borrower is 
not a "holding company", or an "affiliate" of a "holding company" or of a 
"subsidiary company" of a "holding company", within the meaning of the Public 
Utility Holding Company Act of 1935, as amended.

          4.19  ENVIRONMENTAL LAWS.  To the best of the knowledge and belief 
of Borrower:

          (a)   no property of Borrower is currently on, or has ever been on, 
     any federal or state list of superfund sites as listed on the 
     Environmental Protection Agency National Priority List or any comparable 
     state registries or list in any state of the United States (collectively 
     "Superfund Sites");

          (b)   no Hazardous Substances have in the past been generated, 
     transported, and or disposed of, by Borrower at any Superfund Site;

          (c)   except in accordance with a valid permit, license, 
     certificate or approval of the relevant regulatory authority or 
     governmental body, there has been no emission, spill, release, disposal 
     or discharge of any Hazardous Substance into or upon (i) the air, (ii) 
     soils or any improvements located

                                       28
<PAGE>

     thereon, (iii) surface water or groundwater, or (iv) the sewer, septic 
     system or waste treatment, storage or disposal system servicing any 
     property of Borrower; and

          (d)   no complaint, order, directive, claim, citation, notice of 
     environmental report, notice of investigation or other notice by any 
     regulatory authority or governmental body or any other Person with 
     respect to (i) air emissions, (ii) spills, releases or discharges to 
     soils or any improvements located thereon, surface water, groundwater or 
     the sewer, septic system or waste treatment, storage or disposal systems 
     servicing any property of Borrower, (iii) solid or liquid waste 
     disposal, (iv) the use, generation, storage, transportation or disposal 
     of any Hazardous Substance, or (v) other environmental, health or safety 
     matters affecting any property of Borrower, any improvements located 
     thereon, or the business thereon conducted, has been received by 
     Borrower, nor has Borrower been given oral or written notice thereof;

provided, however, that the representations and warranties set forth in 
subparagraphs (c) and (d) above shall apply only to events and conditions 
which either resulted in (i) a continuing lien or encumbrance on the property 
of Borrower or (ii) otherwise materially affect Borrower's use or operation 
of its property or Borrower's ability to repay the Indebtedness evidenced by 
the Note.

                      ARTICLE V.  AFFIRMATIVE COVENANTS

          Borrower covenants, so long as any Indebtedness of Borrower to Bank 
remains unpaid under this Agreement or Bank remains obligated to make 
advances hereunder, to:

          5.01  USE OF FUNDS.  Use the proceeds advanced under the Loan to 
refinance preexisting debt, acquire Oil and Gas Properties, conduct oil and 
gas exploration and development, obtain standby Letters of Credit and use as 
working capital for other ordinary business activities of Borrower, and 
furnish Bank such evidence as it may reasonably require with respect to such 
use.

          5.02  MAINTENANCE AND ACCESS TO RECORDS.  Keep adequate records in 
accordance with good accounting practices, of all of Borrower's transactions 
so that at any time, and from time to time, its true and complete financial 
condition may be readily determined and, at Bank's reasonable request, make 
all financial records and records relating to the Borrowing Base Properties 
available for Bank's inspection and permit Bank to make and take away copies 
thereof for Bank's internal use only and subject to such confidentiality 
agreements as Borrower may reasonably require.

          5.03  QUARTERLY UNAUDITED FINANCIAL STATEMENTS OF BORROWER.  
Deliver to Bank, on or before the fiftieth (50th) day after the end of each 
of the first three calendar quarters of each

                                       29
<PAGE>

fiscal year, unaudited consolidated and consolidating Financial Statements of 
Borrower as at the end of such period and from the beginning of such fiscal 
year to the end of the respective period, as applicable, which Financial 
Statements shall be certified by the president or chief financial officer of 
MRI as being true and correct, subject to changes resulting from year-end 
audit adjustments.

          5.04  ANNUAL AUDITED FINANCIAL STATEMENTS OF MRI.  Deliver to Bank, 
on or before the one hundred and twentieth (120th) day after the close of 
each fiscal year of MRI, a copy of the annual audited consolidated Financial 
Statements of MRI.

          5.05  COMPLIANCE CERTIFICATE.  Deliver to Bank a Compliance 
Certificate: (a) at the time of Borrower's execution of this Agreement, and 
(b) at the time of delivery of each of the Financial Statements pursuant to 
Sections 5.03 and 5.04 above.

          5.06  STATEMENT OF MATERIAL ADVERSE CHANGE IN CONDITION.  Deliver 
to Bank, promptly upon any officer of the Borrower having knowledge of any 
material adverse change in the condition, financial or otherwise, of Borrower 
or its Subsidiaries (or any event or circumstance that would result in any 
such material adverse change in condition including, but not limited to, 
litigation and changes in business), a statement of the president or vice 
president of Borrower, setting forth the change in condition or event or 
circumstance likely to result in any such change and the steps being taken by 
Borrower or the applicable Subsidiary with respect to such change in 
condition or event or circumstance.

          5.07  ADDITIONAL INFORMATION.  Furnish to Bank, promptly upon 
Bank's reasonable request, such additional financial or other information 
concerning the assets, liabilities, operations, and transactions of Borrower, 
in its possession or to which it has access, including, without limitation, 
information concerning the Borrowing Base Properties.

          5.08  COMPLIANCE WITH LAWS AND PAYMENT OF ASSESSMENTS AND CHARGES. 
Comply with all applicable statutes and government regulations, including, 
without limitation, ERISA, and pay all taxes, assessments, governmental 
charges, claims for labor, supplies, rent, its share of all costs and 
expenses incurred under any joint operating agreement, and other obligations 
which, if unpaid, might become a lien against its property, except any of the 
foregoing being contested in good faith and as to which satisfactory accruals 
have been provided and unless failure to comply or pay would not have a 
material adverse effect on the assets of Borrower and its Subsidiaries (taken 
as a whole).

          5.09  MAINTENANCE OF EXISTENCE AND GOOD STANDING.  Maintain 
Borrower's corporate existence and good standing in the jurisdiction of its 
incorporation, and in all jurisdictions wherein

                                       30
<PAGE>

the property now owned or hereafter acquired or business now or hereafter 
conducted necessitates same, other than those jurisdictions wherein the 
failure to so qualify will not have a material adverse effect on Borrower.

          5.10  FURTHER ASSURANCES.  Promptly cure any defects in the 
execution and delivery of this Agreement, the Note, the Security Instruments, 
or any other instrument referred to herein or executed in connection with the 
Note, and upon notice, immediately execute and deliver to Bank, all such 
other and further instruments as may be reasonably required or desired by 
Bank from time to time in compliance with the covenants and agreements made 
in this Agreement.

          5.11  INITIAL EXPENSES OF BANK.  Pay all fees and expenses of 
special legal counsel for Bank, incurred in connection with the negotiation 
and preparation of this Agreement, the Note, the Security Instruments, or any 
other instrument referred to herein or executed in connection with the Note, 
the satisfaction of the conditions precedent set forth in Article III of this 
Agreement and the consummation of the transactions contemplated in this 
Agreement.

          5.12  SUBSEQUENT EXPENSES OF BANK.  Upon request, promptly 
reimburse Bank for all reasonable amounts expended, advanced or incurred by 
Bank to collect the Note or to enforce the rights of Bank under this 
Agreement, the Note, the Security Instruments, or any other instrument 
referred to herein or executed in connection with the Note, which amounts 
shall be deemed compensatory in nature and liquidated as to amount upon 
notice to Borrower by Bank and which amounts will include, but not be limited 
to, (a) all court costs, (b) attorneys' fees, (c) fees of auditors and 
accountants, (d) investigation expenses, (e) internal fees of Bank's in-house 
legal counsel, (f) fees and expenses incurred in connection with Bank's 
participation as a member of the creditors' committee in a case commenced 
under Title 11 of the United States Code or other similar law of the United 
States, the State of Texas or any other jurisdiction, (g) fees and expenses 
incurred in connection with lifting the automatic stay prescribed in Sections 
362 Title 11 of the United States Code, and (h) fees and expenses incurred in 
connection with any action pursuant to Sections 1129 Title 11 of the United 
States Code, incurred by Bank in connection with the collection of any sums 
due under this Agreement, together with interest at the Floating Rate per 
annum, calculated on a basis of a year of three hundred sixty-five (365) or 
three hundred sixty-six (366) days, on each such amount from the date of 
notification to Borrower that the same was expended, advanced or incurred by 
Bank until the date it is repaid to Bank, with the obligations under this 
Section 5.12, surviving the non-assumption of this Agreement in a case 
commenced under Title 11 of the United States Code or other similar law of 
the United States, the State of Texas or any other jurisdiction and being 
binding upon Borrower or a trustee,

                                       31
<PAGE>

receiver or liquidator of any such party appointed in any such case.

          5.13  MAINTENANCE OF TANGIBLE PROPERTY.  Maintain all of Borrower's 
tangible property in good repair and condition and make all necessary 
replacements thereof and operate such property in a good and workmanlike 
manner in accordance with standard industry practices, unless the failure to 
do so would not have a material adverse effect on Borrower and its 
Subsidiaries (taken as a whole) or the value of the Borrowing Base Properties.

          5.14  MAINTENANCE OF INSURANCE.  Continue to maintain, or cause to 
be maintained, insurance with respect to the properties and business of 
Borrower against such liabilities, casualties, risks and contingencies and in 
such amounts as is customary in the industry, in an amount and form, and 
underwritten by an insurer or insurers, as are acceptable to Bank in its sole 
discretion, and furnish to Bank, at the execution of this Agreement and 
annually thereafter, certificates evidencing such insurance.

          5.15  INSPECTION OF TANGIBLE ASSETS/RIGHT OF AUDIT.  Permit (or 
cause to be permitted) any authorized representative of Bank, to visit and 
inspect (at the risk of Bank and/or such representative) any tangible asset 
of Borrower, and/or to audit the books and records of Borrower during normal 
business hours.

          5.16  PAYMENT OF NOTE AND PERFORMANCE OF OBLIGATIONS.  As to 
Borrower, pay the Note according to the reading, tenor and effect thereof, as 
modified hereby, and do and perform every act and discharge all of the 
obligations provided to be performed and discharged hereunder.

          5.17  ERISA REPORTS.  Promptly after the filing or receiving 
thereof, copies of all reports, including annual reports, and notices which 
Borrower files with or receives from the PBGC or the U.S. Department of Labor 
under ERISA; and promptly after Borrower knows or has reason to know that any 
Reportable Event or Prohibited Transaction has occurred with respect to any 
plan or that the PBGC or Borrower has instituted or will institute 
proceedings under Title IV of ERISA to terminate any plan, Borrower will 
deliver to Bank a certificate of the chief financial officer of Borrower 
setting forth details as to such Reportable Event or Prohibited Transaction 
or plan termination and the action Borrower proposes to take with respect 
thereto.

          5.18  TANGIBLE NET WORTH REQUIREMENT.  Borrower shall maintain a 
total Tangible Net Worth of not less than $6,000,000.00, increasing by: (x) 
fifty percent (50%) of net income (excluding losses) of Borrower subsequent 
to September 30, 1997, and (y) one hundred percent (100%) of any increases in 
shareholders' equity resulting from the sale or issuance of stock of any 
Borrower subsequent to September 30, 1997.

                                       32
<PAGE>

          5.19  CASH FLOW TO DEBT SERVICE RATIO.  Borrower will maintain 
(calculated in accordance with GAAP) a ratio of quarterly Cash Flow to 
quarterly Debt Service of not less than 1.25 to 1.0.  For the purposes of 
calculating this ratio:

          (a)   "Cash Flow" shall be defined as the sum of net income plus 
     depreciation and other non-cash charges less non-cash income of 
     Borrower, and

          (b)   "Debt Service" shall be defined as the sum of (i) actual 
     principal amounts paid by Borrower during such quarter on Indebtedness 
     other than in connection with this Loan; and (ii) principal amounts 
     required to be paid by Borrower during such quarter in connection with 
     this Loan.

          5.20  COMPLIANCE WITH ENVIRONMENTAL LAWS.  Comply in all material 
respects with any and all requirements of law, including, without limitation, 
Environmental Laws, (a) related to any natural or environmental resource or 
media located on, above, within, in the vicinity of, related to or affected 
by any Borrowing Base Properties or any other property of Borrower, or (b) 
required for the performance or conduct of its operations, including, without 
limitation, all permits, licenses, registrations, approvals and 
authorizations, and, in this regard, comply fully and in a timely manner 
with, and cause all employees, crew members, agents, contractors, 
subcontractors and future lessees (pursuant to appropriate lease provisions) 
of Borrower while such Persons are acting within the scope of their 
relationship with Borrower, to so comply with, all requirements of law, 
including, without limitation, Environmental Laws, and other requirements 
with respect to the property of Borrower and the operation thereof necessary 
or appropriate to enable Borrower to fulfill its obligations under all 
requirements of law, including, without limitation, Environmental Laws, 
applicable to the use, generation, handling, storage, treatment, transport 
and disposal of any Hazardous Substances now or hereafter located or present 
on or under any such property.

          5.21  HAZARDOUS SUBSTANCES INDEMNIFICATION. Indemnify and hold Bank 
harmless from and against any and all claims, losses, damages, liabilities, 
fines, penalties, charges, administrative and judicial proceedings and 
orders, judgments, remedial actions, requirements and enforcement actions of 
any kind, and all costs and expenses incurred in connection therewith 
(including, without limitation, attorneys' fees and expenses), arising 
directly or indirectly, in whole or in part, out of (a) the presence of any 
Hazardous Substances on, under or from its property, whether prior to or 
during the term hereof, or (b) any activity carried on or undertaken on or 
off its property, whether prior to or during the term hereof, and whether by 
Borrower or any predecessor in title or any employees, agents, contractors or 
subcontractors of Borrower or any predecessor in title, or any third Persons 
at any time occupying or present on such property, in connection with the 
handling, treatment, removal, storage, decontamination, cleanup,

                                       33
<PAGE>

transportation or disposal of any Hazardous Substances at any time located or 
present on or under such property; with the foregoing indemnity further 
applying to any residual contamination on or under the property of Borrower, 
or any property of any other Person, or affecting any natural resources, and 
to any contamination of any property or natural resources arising in 
connection with the generation, use, handling, storage, transportation or 
disposal of any Hazardous Substances, irrespective of whether any of such 
activities were or will be undertaken in accordance with applicable 
requirements of law, including, without limitation, Environmental Laws, and 
surviving satisfaction of all Indebtedness of Borrower to Bank and the 
termination of this Agreement, provided, further, that the claims and other 
actions of any kind against Bank which give rise to such indemnity are not 
barred by the applicable statute of limitations at the time such claims or 
actions are instituted and such indemnity shall not extend to any act or 
omission by Bank or any Affiliate of Bank or any of Bank's employees or 
agents with respect to the relevant property subsequent to Bank becoming the 
owner of, taking possession of to the exclusion of Borrower or assuming 
operations of any property previously owned by Borrower and with respect to 
which property such claim, loss, damage, liability, fine, penalty, charge, 
proceeding, order, judgment, action or requirement arises subsequent to the 
acquisition of title thereto, taking possession thereof or assumption of 
operations thereon by Bank or any Affiliate of Bank or any of Bank's 
employees or agents.  Notwithstanding anything herein to the contrary, the 
provisions of this Section 5.21 shall survive any termination of this 
Agreement and shall survive the payment and performance in full of all 
Obligations owed by Borrower to Bank.

          5.22  CHANGES IN MANAGEMENT.  Notify Bank of any change in the 
senior management of Borrower existing as of the date hereof.

          5.23  OPERATING ACCOUNTS.  Maintain all principal operating 
accounts of Borrower with Bank.

                   ARTICLE VI.  NEGATIVE COVENANTS

          Without the prior written consent of Bank and so long as any part 
of the principal or interest on the Note shall remain unpaid or Bank remains 
obligated to make advances hereunder, Borrower and its Subsidiaries will not:

          6.01  OTHER INDEBTEDNESS.  Incur, create, assume or suffer to exist 
any Indebtedness exceeding an aggregate of $250,000 at any time, whether by 
way of loan or the issuance or sale of securities except (a) Loans hereunder, 
(b) loans by Bank under other credit arrangements, (c) Indebtedness owed to 
Bank by any Affiliates of Borrower, and (d) unsecured accounts payable 
incurred in the ordinary course of business which are not overdue or if

                                       34
<PAGE>

overdue, are acceptable to Bank and are being contested in good faith by 
appropriate proceedings.

          6.02  GUARANTY OF PAYMENT OR PERFORMANCE.  Guaranty any contract or 
obligation of any Person, except for any Indebtedness owed to Bank by any 
Affiliates of Borrower, and except that the foregoing restriction shall not 
apply to endorsements of instruments for collection in the ordinary course of 
business.

          6.03  LOANS, ADVANCES OR INVESTMENTS.  Make or agree to make or 
allow to remain outstanding any loans or advances to, or Investments in, or 
purchase or otherwise acquire all or substantially all of the assets of, or 
any shares of stock or similar interest in, any Person, including Affiliates 
of Borrower, in amounts which exceed $100,000 in the aggregate, except 
advances or extensions of credit in the form of accounts receivable incurred 
in the ordinary course of business and ownership of the stock of Borrower's 
Subsidiaries.

          6.04  MORTGAGES OR PLEDGES OF ASSETS.  Create, incur, assume or 
permit to exist, any mortgage, pledge, security interest, lien or encumbrance 
on any of its properties or assets (now owned or hereafter acquired), except 
that the foregoing restrictions shall not apply to any matters that would 
constitute or result in Permitted Encumbrances.

          6.05  NATURE OF BUSINESS.  Permit any material change to be made in 
the character of its business as conducted as of the date hereof, or permit 
any Subsidiary to permit any material change to be made in the character of 
such Subsidiary's business as conducted as of the date hereof.

          6.06  SALES OF ASSETS.  Sell, lease, assign, transfer or otherwise 
dispose of, in one or any series of related transactions, all or any part of 
its assets, if such transfer is material to Borrower's operations, nor enter 
into any arrangement, directly or indirectly, with any Person to sell and 
rent or lease back such assets or any part thereof which are intended to be 
used for substantially the same purpose or purposes as the assets sold or 
transferred; PROVIDED, HOWEVER, that Bank will consent to sales of assets 
representing not more than ten percent (10%) of the net present value, as 
calculated by Bank in its sole discretion, of the Oil and Gas Properties that 
are included in the Borrowing Base Properties at any time, subject to a 
contemporaneous reduction in the Borrowing Base, in an amount determined by 
Bank in its sole discretion, as the result of the removal of such Oil and Gas 
Properties from the Borrowing Base Properties, and if a Loan Excess would 
result from such reduction in the Borrowing Base, such Loan Excess shall be 
repaid contemporaneously with the consummation of such sale.

          6.07  DIVIDENDS AND DISTRIBUTIONS.  Declare or pay any dividend 
from Borrower or make any distribution on, or purchase, redeem or otherwise 
acquire for value, any interest in Borrower or its Subsidiaries.

                                       35
<PAGE>

          6.08  PAYMENT OF ACCOUNTS PAYABLE.  Allow any account payable to 
remain unpaid after its due date, except such as are overdue that are 
acceptable to Bank, are being contested in good faith, and as to which 
adequate provision or accrual has been made.

          6.09  CANCELLATION OF INSURANCE.  Allow any insurance policy 
required to be carried hereunder to be terminated or lapse or expire without 
provision for adequate renewal thereof.

          6.10  CHANGES IN BUSINESS STRUCTURE.  Consolidate or merge with, or 
purchase (for cash or securities) all or substantially all of the assets or 
all or any part of the capital stock of any corporation, firm, association or 
enterprise, or allow any such entity to be merged into Borrower, nor shall 
Borrower dissolve or liquidate.

          6.11  TRANSACTIONS WITH AFFILIATES.  Enter into any transaction 
between or among Borrower and/or any Subsidiaries with any Affiliate on terms 
that are less favorable than could be obtained in an arms-length transaction 
with a Person that is not an Affiliate.

          6.12  HEDGING TRANSACTIONS.  Enter into any Hedging Transactions 
other than Permitted Hedging Transactions.

          6.13  NEW SUBSIDIARIES.  Form or acquire any new Subsidiaries not 
in existence and owned by Borrower as of the date of this Agreement.

                   ARTICLE VII.  EVENTS OF DEFAULT

          7.01  ENUMERATION OF EVENTS OF DEFAULT.  Any of the following 
events shall be considered an Event of Default as that term is used herein:

          (a)   Default shall be made by Borrower in the payment of any 
     installment of principal on the Note,

          (b)   Default shall be made by Borrower in the payment of any 
     installment of interest on the Note, or any fees or other monetary 
     obligation payable hereunder, and such default shall remain unremedied 
     in excess of five (5) days after notice being given by Bank,

          (c)   Default shall be made by Borrower in the due observance or 
     performance of any affirmative covenant required in this Agreement, the 
     Note, or any Security Instrument, and such default shall remain 
     unremedied for in excess of thirty (30) days after the earlier of: (i) 
     such default becoming known to Borrower, or (ii) notice being given by 
     Bank.

          (d)   Default shall be made by Borrower in the due observance or 
     performance of any negative covenant required in this Agreement, the 
     Note, or any Security Instruments.

                                       36
<PAGE>

          (e)  Any representation or warranty herein made by Borrower proves to
     have been untrue in any material respect, or any representation, statement
     (including Financial Statements), certificate or data furnished or made by
     Borrower to Bank in connection herewith proves to have been untrue in any
     material respect as of the date the facts therein set forth were stated or
     certified;

          (f)  Default shall be made by Borrower (as principal or guarantor or
     other surety) in payment or performance of any bond, debenture, note or
     other evidence of Indebtedness for borrowed money, or any other credit
     agreement, loan agreement, indenture, promissory note or similar agreement
     or instrument executed in connection with any of the foregoing in excess 
     of $25,000 in the aggregate; and such default shall remain unremedied for 
     in excess of the period of grace, if any, with respect thereto, with the
     effect of accelerating the maturity of any such Indebtedness;

          (g)  Borrower applies for or consents to the appointment of a
     receiver, trustee or liquidator of it or all or a substantial part of its
     assets, or (ii) files a voluntary petition commencing a case under Title 
     11 of the United States Code, seeking liquidation, reorganization or
     rearrangement or taking advantage of any bankruptcy, insolvency, debtor's
     relief or other similar law of the United States, the State of Texas or any
     other jurisdiction, or (iii) makes a general assignment for the benefit of
     creditors, or (iv) is unable, or admits in writing its inability to pay its
     debts generally as they become due, or (v) files an answer admitting the
     material allegations of a petition filed against it in any case commenced
     under Title 11 of the United States Code or any reorganization, insolvency,
     conservatorship or similar proceeding under any bankruptcy, insolvency,
     debtor's relief or other similar law of the United States, the State of
     Texas or any other jurisdiction;

          (h)  An order, judgment or decree shall be entered against Borrower by
     any court of competent jurisdiction or by any other duly authorized
     authority, on the petition of a creditor or otherwise, granting relief
     under Title 11 of the United States Code or under any bankruptcy,
     insolvency, debtor's relief or other similar law of the United States, the
     State of Texas or any other jurisdiction, approving a petition seeking
     reorganization or an arrangement of its debts or appointing a receiver,
     trustee, conservator, custodian or liquidator of it or all or any
     substantial part of its assets, and the failure to have such order,
     judgment or decree dismissed within ten (10) days of its entry; 

          (i)  Borrower has concealed, removed, or permitted to be concealed or
     removed, any part of its property, with intent to hinder, delay or defraud
     its creditors or any of them; or has made or suffered a transfer of any of
     its property which may be fraudulent under any bankruptcy, fraudulent
     conveyance or 

                                      37
<PAGE>

     similar law; or has made any transfer of its property to or
     for the benefit of a creditor at a time when other creditors similarly
     situated have not been paid; or has suffered or permitted, while insolvent,
     any creditor to obtain a lien upon any of its property through legal
     proceedings or distraint which is not vacated within thirty (30) days from
     the date thereof.

          7.02  RIGHTS UPON EVENT OF DEFAULT.  Upon the happening of an Event 
of Default specified in Subsections 7.01 (g) or (h), the entire aggregate 
principal amount of all Indebtedness then outstanding hereunder and the 
interest accrued thereon shall automatically become immediately due and 
payable, and upon the happening and continuation of any other Event of 
Default, Bank may declare the entire aggregate principal amount of all 
Indebtedness then outstanding hereunder and the interest accrued thereon 
immediately due and payable.  In either case, the entire principal and 
interest shall thereupon become immediately due and payable, without notice 
(including, without limitation, notice of intent to accelerate maturity or 
notice of acceleration of maturity) and without presentment, demand, protest, 
notice of protest or other notice of default or dishonor of any kind, except 
as provided to the contrary elsewhere herein, all of which are hereby 
expressly waived by Borrower.

          Upon the happening and continuation of any Event of Default, all 
obligations (if any) of Bank hereunder shall immediately cease and terminate 
unless and until Bank shall reinstate the same in writing.  

          7.03  RIGHTS UPON UNMATURED EVENT OF DEFAULT.  Upon the happening 
and during the continuation of an Unmatured Event of Default, all obligations 
of Bank to Borrower hereunder shall, at the option of Bank, be suspended.

                             ARTICLE VIII.  MISCELLANEOUS

          8.01  SECURITY INTERESTS IN DEPOSITS AND RIGHT OF OFFSET OR 
BANKER'S LIEN.  Borrower hereby transfers, assigns and pledges to Bank and/or 
grants to Bank a security interest (as security for the payment and/or 
performance of the obligations of Borrower under this Agreement and the Note, 
with such interest of Bank to be retransferred, reassigned and/or released by 
Bank at the expense of Borrower upon payment in full and/or complete 
performance by Borrower of all such obligations) and the right, exercisable 
at such time as any obligation hereunder shall mature, whether by 
acceleration of maturity or otherwise of offset or banker's lien against all 
funds or other property of Borrower now or hereafter or from time to time on 
deposit with or in the possession of Bank, including, without limitation, all 
certificates of deposit and other depository accounts.

          8.02  SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.  All 
representations and warranties of Borrower and all covenants and agreements 
herein made shall survive the execution 

                                      38
<PAGE>

and delivery of the Note and this Agreement and shall remain in force and 
effect so long as any debt is outstanding under the Note, or any renewal or 
extension of this Agreement or the Note, or Bank remains obligated to make 
advances hereunder.

          8.03  NOTICES AND OTHER COMMUNICATIONS.  Notices, requests and 
communications hereunder shall be in writing and shall be sufficient in all 
respects if delivered to the relevant address indicated below (including 
delivery by registered or certified United States mail, telex, telegram or 
hand):

          (a) If to Bank:

          COMPASS BANK 
          24 Greenway Plaza, 14th Floor
          Houston, Texas 77046
          Attention: Energy Lending
          Fax:  (713) 968-8292

          (b) If to Borrower:

          MIDLAND RESOURCES, INC.
          616 FM 1960 West, Suite 600
          Houston, Texas 77090-3027
          Attention:  D. H. Warley, III
          Fax:  (281) 580-1051

          Any party may, by proper written notice hereunder to the other, 
change the individuals or addresses to which such notices to it shall 
thereafter be sent.

          8.04  PARTIES IN INTEREST.  All covenants and agreements herein 
contained by or on behalf of Borrower shall be binding upon Borrower and its 
successors and assigns and inure to the benefit of Bank and its successors 
and assigns.

          8.05  RENEWALS AND EXTENSIONS.  All provisions of this Agreement 
relating to the Note shall apply with equal force and effect to each and all 
promissory notes hereafter executed which in whole or in part represent a 
renewal, extension, amendment, modification or rearrangement of any part of 
the Indebtedness originally represented by the Note.

          8.06  NO WAIVER BY BANK.  No course of dealing on the part of Bank, 
its officers or employees, nor any failure or delay by Bank with respect to 
exercising any of its rights, powers or privileges under this Agreement, the 
Note, the Security Instruments or any other instrument referred to herein or 
executed in connection with the Note shall operate as a waiver thereof.  The 
rights and remedies of Bank under this Agreement, the Note, the Security 
Instruments or any other instrument referred to herein or executed in 
connection with the Note shall be cumulative and the exercise or partial 
exercise of any such right or remedy shall not preclude the exercise of any 
other right or remedy.  In the event that Borrower is unable to satisfy any 
covenant, warranty or 

                                      39
<PAGE>

condition herein, no advance of loan proceeds by Bank shall have the effect 
of precluding Bank from thereafter declaring any such continuing inability to 
be an Event of Default as hereinabove provided.

          8.07  INDEMNIFICATION.  BORROWER HEREBY RELEASES AND AGREES TO 
INDEMNIFY AND HOLD BANK AND ITS OFFICERS, EMPLOYEES, DIRECTORS, AGENTS AND 
ATTORNEYS (COLLECTIVELY THE "BANK PARTIES") HARMLESS, FROM AND AGAINST ALL 
CLAIMS, DAMAGES, LIABILITIES AND EXPENSES, KNOWN OR UNKNOWN, ACCRUED AND 
UNACCRUED, INCLUDING ANY OF THE FOREGOING ALLEGED TO HAVE RESULTED FROM 
NEGLIGENCE OF ANY OF THE BANK PARTIES, UNLESS ATTRIBUTABLE TO BANK PARTIES' 
OWN GROSS NEGLIGENCE OR WILFUL MISCONDUCT, THAT MAY NOW OR HEREAFTER BE 
ASSERTED AGAINST ANY OF BANK PARTIES IN CONNECTION WITH OR ARISING OUT OF ANY 
INVESTIGATION, LITIGATION OR PROCEEDING DIRECTLY OR INDIRECTLY RELATING TO OR 
ARISING OUT OF ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

          8.08  GOVERNING LAW.  THIS AGREEMENT AND THE NOTE SHALL BE DEEMED 
TO BE CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND 
GOVERNED BY THE LAWS OF THE STATE OF TEXAS.

          8.09  INCORPORATION OF EXHIBITS.  The Exhibits attached to this 
Agreement are incorporated herein for all purposes and shall be considered a 
part of this Agreement.

          8.10  SURVIVAL UPON UNENFORCEABILITY.  In the event any one or more 
of the provisions contained in this Agreement, the Note, the Security 
Instruments or in any other instrument referred to herein or executed in 
connection with the Note shall, for any reason, be held to be invalid, 
illegal or unenforceable in any respect, such invalidity, illegality or 
unenforceability shall not affect any other provision hereof or of any other 
instrument referred to herein or executed in connection herewith.

          8.11  RIGHTS OF THIRD PARTIES.  All provisions herein are imposed 
solely and exclusively for the benefit of Bank and Borrower and no other 
Person shall have standing to require satisfaction of such provisions in 
accordance with their terms or be entitled to assume that Bank will refuse to 
make advances in the absence of strict compliance with any or all thereof and 
any or all of such provisions may be freely waived in whole or in part by 
Bank at any time if in its sole discretion it deems it advisable to do so.

          8.12  AMENDMENTS OR MODIFICATIONS OF THIS AGREEMENT.  Neither this 
Agreement nor any provision hereof may be changed, waived, discharged or 
terminated orally, but only by an instrument in writing signed by the party 
against whom enforcement of the change, waiver, discharge or termination is 
sought.

          8.13  AGREEMENT CONSTRUED AS AN ENTIRETY.  This Agreement, for 
convenience only, has been divided into Articles and Sections and it is 
understood that the rights, powers, privileges, duties and other legal 
relations of the parties hereto shall be determined from this Agreement as an 
entirety and without regard to 

                                      40
<PAGE>

the aforesaid division into Articles and Sections and without regard to 
headings prefixed to said Articles or Sections.

          8.14  NUMBER AND GENDER.  Whenever the context requires, reference 
herein made to the single number shall be understood to include the plural 
and likewise the plural shall be understood to include the singular.  Words 
denoting sex shall be construed to include the masculine, feminine, and 
neuter, when such construction is appropriate, and specific enumeration shall 
not exclude the general, but shall be construed as cumulative.

          8.15  AGREEMENT SUPERSEDES ALL PRIOR AGREEMENTS.  THIS AGREEMENT, 
TOGETHER WITH THE NOTE AND THE SECURITY INSTRUMENTS, CONSTRUED TOGETHER WITH 
THE REVOLVING CREDIT AGREEMENT AND ALL INSTRUMENTS EXECUTED PURSUANT THERETO, 
REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO WITH 
RESPECT TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE 
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES AND 
SHALL SUPERSEDE ANY PRIOR AGREEMENT BETWEEN THE PARTIES HERETO, WHETHER 
WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF.  THERE ARE NO 
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

          8.16  CONTROLLING PROVISION UPON CONFLICT.  In the event of a 
conflict between the provisions of this Agreement and those of the Note, the 
Security Instruments or any other instrument referred to herein or executed 
in connection with the Note, the provisions of this Agreement shall control.

          8.17  TIME, PLACE AND METHOD OF PAYMENTS.  All payments required 
pursuant to this Agreement or the Note shall be made in immediately available 
funds; shall be deemed received by Bank on the next Business Day following 
receipt if such receipt is after 3:00 p.m., on any Business Day, and shall be 
made at the principal banking quarters of Bank.

          8.18  COUNTERPART EXECUTION.  This Agreement may be executed as one 
instrument signed by all parties or in separate counterparts hereof, each of 
which counterparts shall be considered an original and all of which shall be 
deemed to be one instrument, and any signed counterpart shall be deemed 
delivered by the party signing it if sent to any other party hereto by 
electronic facsimile transmission.

          8.19  AMENDED, RESTATED AND COMBINED AGREEMENT.  This Agreement 
amends and restates the First Union Loan Agreement, as such has been 
heretofore amended.  All Security Instruments previously executed pursuant to 
the First Union Loan Agreement, as amended, shall continue to secure all 
indebtedness and obligations evidenced by and/or arising under this 
Agreement, the Note, and the other Loan Documents executed pursuant hereto.  
Upon the Closing, the Guarantors, as defined in the First Union Loan 
Agreement, shall thereupon be released from their respective guarantees, 
although certain of such Guarantors have become Borrowers hereunder, and the 
Security Instruments that such Guarantors have heretofore executed 

                                      41
<PAGE>

securing such guarantees shall continue in force and effect, in order to 
secure Borrower's Indebtedness to Bank hereunder.  

          IN WITNESS WHEREOF, this Agreement is executed as of the date first 
above written.

                                   BORROWER:

                                   MIDLAND RESOURCES, INC.


                                   By: ________________________________
                                       D. H. Warley, III
                                       President

                                   MIDLAND RESOURCES OPERATING
                                   COMPANY, INC.
                               

                                   By: ________________________________
                                       D. H. Warley, III
                                       President


                                   SUMMIT PETROLEUM CORPORATION


                                   By: ________________________________
                                       D. H. Warley, III
                                       President

                                   BANK:

                                   COMPASS BANK


                                   By: ________________________________
                                       Kathleen J. Bowen
                                       Vice President


                                      42
<PAGE>

                                   SCHEDULE 1.01(A)

                              BORROWING BASE PROPERTIES

This Schedule 1.01(a) sets forth the description of the initial Borrowing 
Base Properties covered by the Agreement to which this Schedule 1.01(a) is 
attached. All of the terms defined in the Agreement are used in this Schedule 
1.01(a) with the same meanings given therein.

The Borrowing Base Properties include:

     (a)  All of Borrower's right, title and interest in and to the oil, gas 
and mineral leases described herein and/or lands described in and subject to 
such oil, gas and mineral leases (regardless, as to such leases and/or lands, 
of any surface acreage and/or depth limitations set forth in any description 
of any of such oil, gas and mineral leases), and all of Borrower's right, 
title and interest in and to any of the oil, gas and minerals in, on or under 
the lands, if any, described on this Schedule 1.01(a), including, without 
limitation, all contractual rights, fee interests, leasehold interests, 
overriding royalty interests, non-participating royalty interests, mineral 
interests, production payments, net profits interests, or any other interest 
measured by or payable out of production of oil, gas or other minerals from 
the oil, gas and mineral leases and/or lands described herein; and

     (b)  All of the foregoing interests of Borrower as such interests may be 
enlarged by the discharge of any payments out of production or by the removal 
of any charges or encumbrances together with Borrower's interests in, to and 
under or derived from all renewals and extensions of any oil, gas and mineral 
leases described herein, it being specifically intended hereby that any new 
oil and gas lease (i) in which an interest is acquired by Borrower after the 
termination or expiration of any oil and gas lease, the interests of Borrower 
in, to and under or derived from which are subject to the lien and security 
interest hereof, and (ii) that covers all or any part of the property 
described in and covered by such terminated or expired leases, shall, to the 
extent, and only to the extent such new oil and gas lease may cover such 
property, be considered a renewal or extension of such terminated or expired 
lease; and

     (c)  All right, title and interest of Borrower in, to and under or 
derived from any operating, farmout, and bidding agreements, assignments and 
subleases, whether or not described in this Schedule 1.01(a), to the extent, 
and only to the extent, that such agreements, assignments and subleases (i) 
cover or include any of Borrower's present right, title and interest in and 
to the leases and/or lands described in this Schedule 1.01(a), or (ii) cover 
or include any other undivided interests now or hereafter held by Borrower 
in, to and under the described leases and/or lands, including, without 
limitation, any future operating, farmout and bidding agreements, 
assignments, subleases and pooling, unitization and communitization 
agreements and the units created 

                               Page 1.01(a)-1
<PAGE>

thereby (including, without limitation all units formed under orders, 
regulations, rules or other official acts of any governmental body or agency 
having jurisdiction) to the extent and only to the extent that such 
agreements, assignments, subleases, or units cover or include the described 
leases and/or lands; and

     (d)  All right, title, and interest of Borrower in, to and under or 
derived from all presently existing and future advance payment agreements, 
oil, casinghead gas and gas sales, exchange, and processing contracts and 
agreements including, without limitation, those contracts and agreements that 
are described on this Schedule 1.01(a) to the extent, and only to the extent, 
those contracts and agreements cover or include the described leases and/or 
lands herein; and

     (e)  All right, title and interest of Borrower in, to and under or 
derived from all existing and future permits, licenses, easements and similar 
rights and privileges that relate to or are appurtenant to any of the 
described leases and/or lands.

          Notwithstanding the intention of this Agreement to cover all of the 
right, title and interest of Borrower in and to the described leases and/or 
lands, Borrower hereby specifically warrants and represents that the 
interests covered by this Schedule 1.01(a) are not greater than the working 
interest nor less than the net revenue interest, overriding royalty interest, 
net profit interest, production payment interest or other interest payable 
out of or measured by production set forth in connection with each oil and 
gas well described in this Schedule 1.01(a).  In the event Borrower owns any 
other or greater interest, such additional interest shall also be covered by 
and included in this Agreement.  The designation "Working Interest" or "W.I." 
means an interest owned in an oil, gas, and mineral lease that determines the 
cost bearing percentage of the owner of such interest.  The designation "Net 
Revenue Interest" or "NRI" means net revenue interest, or that portion of the 
production attributable to the owner of a working interest after deduction 
for all royalty burdens, overriding royalty burdens, or other burdens on 
production, except severance, production, windfall profits and other similar 
taxes.  The designation "Overriding Royalty Interest" or "ORRI" means an 
interest in production which is free of any obligation for the expense of 
exploration, development and production, bearing only its pro rata share of 
severance, production, windfall profits and other similar taxes.

                               Page 1.01(a)-2
<PAGE>

                                 PROPERTY DESCRIPTION

                                    SUBJECT LEASES

LESSOR                                 LESSEE          LEASE DATE     BOOK/PAGE

                                      [to come]

                                    SUBJECT WELLS
<TABLE>
<CAPTION>
______________________________________________________________________________
                                                 Working       Net Revenue
                          Wells                  Interest        Interest
______________________________________________________________________________
<S>                      <C>                     <C>           <C>

                         [to come]
______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

______________________________________________________________________________

</TABLE>

                                 Page 1.01(a)-3
<PAGE>

                                 Page 1.01(a)-4
<PAGE>

                                    SCHEDULE 3.16

                        FORM OF OPINION OF BORROWER'S COUNSEL
<PAGE>

                                    SCHEDULE 4.09

                               PURCHASERS OF PRODUCTION

                     See pages 4.09-2 and 4.09-3 attached hereto.

                                        4.09-1
<PAGE>

                                    SCHEDULE 4.11

                                      LITIGATION

                                         None

                                         4.09-1
<PAGE>

                                     EXHIBIT "A"

                                COMPLIANCE CERTIFICATE

                     [bracketed information need not be included
                         in Certificate delivered at Closing]


          I, D. H. Warley, III, the President of MIDLAND RESOURCES, INC. (the 
"Company"), pursuant to Section 5.05 of the Loan Agreement dated as of 
December 17, 1997, by and among COMPASS BANK, ("Bank"), the Company and 
certain co-borrowers that are Subsidiaries of the Company (the "Agreement") 
do hereby certify, as of the date hereof, that to my knowledge:

     1.   No Event of Default (as defined in the Agreement) has occurred and is
          continuing, and no Unmatured Event of Default (as defined in the
          Agreement) has occurred and is continuing[, except for the following
          events (include actions taken to cure such situations):

          ____________________________________________________________
          ____________________________________________________________
          ____________________________________________________________
          ____________________________________________________________
          ____________________________________________________________
          __________________________________________________________];

     2.   No material adverse change has occurred in the business prospects,
          financial condition, or the results of operations of the Company 
          since the date of the previous Financial Statements (as defined in 
          the Agreement) provided to Bank[, except for the following changes
          (include actions taken to cure such situations):

          ____________________________________________________________
          __________________________________________________________];

     3.   Each of the representations and warranties of the Company contained 
          in Article IV of the Agreement is true and correct in all respects[,
          except for the following matters (include actions taken to cure such
          situations): 

          ____________________________________________________________
          _____________________________________________________];  and

     [4.  The consolidated financial condition of the Company and its
          Subsidiaries for the quarter ending __________ is as follows:

                                      A-1
<PAGE>

<TABLE>
<CAPTION>
                            DATE OR          REQUIRED               ACTUAL 
                             TIME            RATIO OR              RATIO OR
     FINANCIAL COVENANT     PERIOD            AMOUNT                AMOUNT 
     ------------------     ------            ------                ------
<S>                       <C>            <C>                       <C>
(a)  Tangible Net Worth   At all times   not < $6,000,000.00       __________
                                         plus 50% of net
                                         income (excluding
                                         losses) subsequent
                                         to 09/30/97, plus
                                         100% of any increases
                                         in shareholders' equity
                                         resulting from the sale
                                         or issuance of stock 
                                         of any Borrower 
                                         subsequent to 09/30/97

(b)  Ratio of quarterly   Each quarter   not < 1.25:1.00           __________
     Cash Flow to         beginning
     quarterly Debt       with the
     Service              quarter ending
                          12/31/97  

(c)  Additional           At all times   not > $250,000.00         _________]
     Debt 

</TABLE>

          This certificate is executed this ______ day of ____, 199_.

                                      MIDLAND RESOURCES, INC.


                                      By: ____________________________________
                                          D. H. Warley, III
                                          President

                                      A-2
<PAGE>

                                   EXHIBIT "B"

                                      NOTE

$30,000,000.00                   Houston, Texas               December 17, 1997

     On the dates hereinafter prescribed, for value received, MIDLAND 
RESOURCES, INC., a Texas corporation, MIDLAND RESOURCES OPERATING COMPANY, 
INC., a Texas corporation, and SUMMIT PETROLEUM CORPORATION, a Colorado 
corporation (the "Borrower"), having an address at 616 FM 1960 West, Suite 
600, Houston, Texas, 77090-3027, promises to pay to the order of COMPASS BANK 
(herein called "Bank"), at its principal offices at 24 Greenway Plaza, 14th 
Floor, Houston, Harris County, Texas 77046, (i) the principal amount of 
THIRTY MILLION AND NO/100 DOLLARS ($30,000,000.00) or the principal amount 
advanced pursuant to the terms of the Loan Agreement (defined herein) as of 
the date of maturity hereof, whether by acceleration or otherwise, whichever 
may be the lesser, and (ii) interest on the principal balance from time to 
time advanced and remaining unpaid from the date of the advance until 
maturity at a rate of interest equal to lesser of (a) the "Interest Rate" (as 
defined in the Loan Agreement), or (b) the Maximum Rate (as hereinafter 
defined).  Any increase or decrease in interest rate resulting from a change 
in the Maximum Rate shall be effective immediately when such change becomes 
effective, without notice to Borrower, unless Applicable Law (as defined 
below) requires that such increase or decrease not be effective until a later 
time, in which event such increase or decrease shall be effective at the 
earliest time permitted under the provisions of such law.

     Notwithstanding the foregoing, if during any period the Interest Rate 
exceeds the Maximum Rate, the rate of interest in effect on this Note shall 
be limited to the Maximum Rate during each such period, but at all times 
thereafter the rate of interest in effect on this Note shall be the Maximum 
Rate until the total amount of interest accrued on this Note equals the total 
amount of interest which would have accrued hereon if the Floating Rate had 
at all times been in effect.

     All payments on this Note shall be applied first to accrued interest and 
the balance, if any, to principal.

     This Note is a revolving credit note and it is contemplated that by 
reason of prepayments hereon there may be times when no indebtedness is owing 
hereunder; but notwithstanding such occurrence, this Note shall remain valid 
and in full force and effect as to each principal advance made hereunder 
subsequent to each such occurrence.  Each principal advance and each payment 
hereof made pursuant to this Note shall be reflected by Bank's records and 
the aggregate unpaid amounts reflected by such records shall constitute 
rebuttably presumptive evidence of the principal and unpaid, accrued interest 
remaining outstanding on this Note.

     "Maximum Rate" means the Maximum Rate of non-usurious interest permitted
from day to day by applicable law, including as to Article 5069-1.04, Vernon's
Texas Revised Civil Statutes Annotated (and as the same may be incorporated by



                                                                --------------
                                                                   INITIAL FOR
                                                                IDENTIFICATION

                                      B-1
<PAGE>

reference in other Texas statutes), but otherwise without limitation, that 
rate based upon the "indicated weekly rate ceiling."

     "Applicable Law" means that law in effect from time to time and 
applicable to this Note which lawfully permits the charging and collection of 
the highest permissible lawful, non-usurious rate of interest on this Note, 
including laws of the State of Texas and laws of the United States of 
America.  It is intended that Article 1.04, Title 79, Revised Civil Statutes 
of Texas, 1927, as amended (Article 5069-1.04, as amended, Vernon's Texas 
Civil Statutes) shall be included in the laws of the State of Texas in 
determining Applicable Law; and for the purpose of applying said Article 1.04 
to this Note, the interest ceiling applicable to this Note under said Article 
1.04 shall be the indicated weekly rate ceiling from time to time in effect.  
Borrower and Bank hereby agree that Chapter 15 of Subtitle 3, Title 79, 
Revised Civil Statutes of Texas, 1925, as amended, shall not apply to this 
Note or the loan transaction evidenced by, and referenced in, the Loan 
Agreement (hereinafter defined) in any manner, including without limitation, 
to any account or arrangement evidenced or created by, or provided for in, 
this Note.

     "Business Day" shall mean any day on which banks are open for general 
banking business in the State of Texas, other than a Saturday, a Sunday, a 
legal holiday or any other day on which banks in the State of Texas are 
required or authorized by law or executive order to close.

     The principal sum of this Note, after giving credit for unadvanced 
principal, if any, remaining at final maturity, shall be due and payable on 
or before the Maturity Date, as prescribed in the Loan Agreement defined 
below; interest to accrue upon the principal sum from time to time owing and 
unpaid hereunder shall be due and payable in monthly installments, as it 
accrues, with the first such monthly installment of interest hereon being due 
and payable on the first day of February 1998, and with such subsequent 
installments of interest being due and payable on the first day of each 
succeeding month thereafter; provided, however, the final installment of 
interest hereunder shall be due and payable not later than the maturity of 
the principal sum hereof, howsoever such maturity may be brought about.

     When the first (1st) day of a calendar month falls upon a Saturday, 
Sunday or legal holiday, the payment of interest and principal, if any, due 
upon such date shall be due and payable upon the next succeeding Business Day.

     In no event shall the aggregate of the interest on this Note, plus any 
other amounts paid in connection with the loan evidenced by this Note which 
would under Applicable Law be deemed "interest," ever exceed the maximum 
amount of interest which, under Applicable Law, could be lawfully charged on 
this Note. Bank and Borrower specifically intend and agree to limit 
contractually the interest payable on this Note to not more than an amount 
determined at the Maximum Rate.  Therefore, none of the terms of this Note or 
any other instruments pertaining to or securing this Note shall ever be 
construed to create a contract to pay interest at a rate in excess of the 
Maximum Rate, and neither Borrower nor any other party liable herefor shall 
ever be liable for interest in excess of that determined at the Maximum Rate, 
and the provisions of this paragraph shall



                                                                --------------
                                                                   INITIAL FOR
                                                                IDENTIFICATION

                                      B-2
<PAGE>

control over all provisions of this Note or of any other instruments 
pertaining to or securing this Note.  If any amount of interest taken or 
received by Bank shall be in excess of the maximum amount of interest which, 
under Applicable Law, could lawfully have been collected on this Note, then 
the excess shall be deemed to have been the result of a mathematical error by 
the parties hereto and shall be refunded promptly to Borrower.  All amounts 
paid or agreed to be paid in connection with the indebtedness evidenced by 
this Note which would under Applicable Law be deemed "Interest" shall, to the 
extent permitted by Applicable Law, be amortized, prorated, allocated and 
spread throughout the full term of this Note.

     This Note is secured by all security agreements, collateral assignments, 
mortgages and lien instruments executed by Borrower (or by any other party) 
in favor of Bank, including those executed simultaneously herewith, those 
executed heretofore and those hereafter executed, and including specifically 
and without limitation the "Security Instruments" described and defined in 
the Loan Agreement of even date between Borrower and Bank (the "Loan 
Agreement").

     This Note is the Revolving Note issued pursuant to the Loan Agreement. 
It amends, restates, rearranges and extends that certain promissory note 
dated October 31, 1996 in the face amount of $20,000,000.00, executed by 
Midland Resources, Inc. and payable to the order of First Union Bank of North 
Carolina ("First Union"), which has been assigned to Bank by First Union 
pursuant to an Assignment of Notes and Liens of even date herewith.  All 
liens and security interests held by or benefiting First Union to secure the 
indebtedness evidenced by such prior note have been assigned to Bank, and 
shall continue to secure the indebtedness evidenced by this Note.  Reference 
is hereby made to the Loan Agreement for a statement of the rights and 
obligations of the holder of this Note and the duties and obligations of 
Borrower in relation thereto; but neither this reference to the Loan 
Agreement nor any provisions thereof shall affect or impair the absolute and 
unconditional obligation of Borrower to pay any outstanding and unpaid 
principal of and interest on this Note when due, in accordance with the terms 
of the Loan Agreement.  Each advance and each payment made pursuant to this 
Note shall be reflected by notations made by Bank on its records and the 
aggregate unpaid amounts reflected by the notations on the records of Bank 
shall be deemed rebuttably presumptive evidence of the principal amount owing 
under this Note.

     In the event of default in the payment when due of any of the principal 
of or any interest on this Note, or in the event of default under the terms 
of the Loan Agreement or any of the Security Instruments, or if any event 
occurs or condition exists which authorizes the acceleration of the maturity 
of this Note under any agreement made by Borrower, Bank (or other holder of 
this Note) may, at its option, without presentment or demand or any notice to 
Borrower or any other person liable herefor, declare the unpaid principal 
balance of and accrued interest on this Note to be immediately due and 
payable.

     If this Note is collected by suit or through the Probate or Bankruptcy
Court, or any judicial proceeding, or if this Note is not paid at maturity,
however such maturity may be brought about, and is placed in the hands of an
attorney for collection, then Borrower agrees to pay reasonable attorneys' fees,



                                                                --------------
                                                                   INITIAL FOR
                                                                IDENTIFICATION

                                      B-3
<PAGE>

not to exceed 10% of the full amount of principal and interest owing hereon 
at the time this Note is placed in the hands of an attorney.

     Borrower and all sureties, endorsers and guarantors of this Note waive 
demand, presentment for payment, notice of nonpayment, protest, notice of 
protest, notice of intent to accelerate maturity, notice of acceleration of 
maturity, and all other notices, filing of suit and diligence in collecting 
this Note or enforcing any of the security herefor, and agree to any 
substitution, exchange or release of any such security or the release of any 
party primarily or secondarily liable hereon and further agrees that it will 
not be necessary for Bank, in order to enforce payment of this Note by them, 
to first institute suit or exhaust its remedies against any Borrower or 
others liable herefor, or to enforce its rights against any security herefor, 
and consent to any one or more extensions or postponements of time of payment 
of this Note on any terms or any other indulgences with respect hereto, 
without notice thereof to any of them.  Bank may transfer this Note, and the 
rights and privileges of Bank under this Note shall inure to the benefit of 
Bank's representatives, successors or assigns.

          Executed this 17th day of December 1997.


                                      MIDLAND RESOURCES, INC.


                                      By: _____________________________

                                      B-4
<PAGE>

                                      MIDLAND RESOURCES OPERATING COMPANY, INC.


                                      By: _____________________________


                                      SUMMIT PETROLEUM CORPORATION


                                      By: _____________________________

                                      B-5
<PAGE>

                                     EXHIBIT "C"

                                 SECURITY INSTRUMENTS

     The Security Instruments securing the obligations of Borrower and 
Indebtedness to Bank shall include the following, each in form and substance 
satisfactory to Bank:

1.   PRIOR SECURITY INSTRUMENTS all Security Instruments executed pursuant 
to, and as defined in, the First Union Loan Agreement shall continue in force 
and effect to secure the Indebtedness and Obligations of Borrower arising 
pursuant to this Agreement, with such amendments thereof to be executed by 
Borrower as are necessary or appropriate from time to time, in the good faith 
opinion of Bank, to evidence the fact that Bank is successor in interest to 
the rights of First Union under such Security Instruments, and that such 
Security Instruments continue to relate to all Indebtedness and Obligations 
arising under this Agreement. 

2.   DEED OF TRUST, MORTGAGE, SECURITY AGREEMENT, AND ASSIGNMENT OF 
PRODUCTION covering Borrower's interest in all Borrowing Base Properties, the 
personal property and equipment therein and thereon, the production of oil, 
gas, and other minerals therefrom, and all of the products and proceeds 
thereof.

3.   SECURITY AGREEMENT granting Bank a first priority security interest in 
all of Borrower's accounts, equipment, machinery, fixtures, inventory, 
chattel paper, documents, contracts, instruments and general intangibles 
relating to or arising out of the Borrowing Base Properties, whether now 
owned or hereafter acquired, and all products and proceeds thereof.

4.   FINANCING STATEMENTS in connection with the Security Instruments 
described in the preceding paragraph, in form and number satisfactory to Bank 
as Bank, from to time, may specify (including additional or supplemental 
financing statements, amendments thereto, and continuation statements 
thereof).

5.   LETTERS IN LIEU OF TRANSFER ORDERS covering Borrower's interest in oil 
and gas produced from any additional Borrowing Base Properties and in the 
proceeds from the sale thereof, pursuant to the assignment of production 
included in the Deeds of Trust referenced above.

6.   OTHER SECURITY INSTRUMENTS.  Such other instruments as are necessary or
appropriate from time to time, in the good faith opinion of Bank, to perfect to
the satisfaction of Bank Bank's liens, security interests, and other rights in
the Borrowing Base Properties and in any and all other collateral covered by or
described in (or, as evidenced by the Agreement, intended to have 

                                      C-1
<PAGE>

been covered by) any of the other Security Instruments described above.

POWER OF ATTORNEY.  To the fullest extent permitted by Law, Borrower hereby 
appoints Bank as its attorney-in-fact (without requiring Bank to act as such) 
to execute any Security Instrument in the name of Borrower, and to perform 
all other acts that Bank deems appropriate to perfect and continue its liens, 
security interests, and other rights in, and to protect and preserve, the 
Borrowing Base Properties and other collateral covered by or described in 
(or, as evidenced by the Agreement, intended to have been covered by) any of 
the Security Instruments described above, but only to the extent required of 
Borrower under the terms of this Agreement.  This power of attorney is 
coupled with an interest and shall be irrevocable until the full and final 
payment and performance of all of Borrower's Indebtedness and Obligations to 
Bank.

                                      C-2
<PAGE>

                                  EXHIBIT "D"

             FORM OF REQUEST FOR ADVANCE, CONTINUATION OR CONVERSION

COMPASS BANK
24 GREENWAY PLAZA, 14th Floor
HOUSTON, TEXAS 77046

Attention:  Energy Lending Group

          RE:  Revolving Credit Agreement dated as of December 17, 1997, by and
               between MIDLAND RESOURCES, INC., MIDLAND RESOURCES OPERATING
               COMPANY, INC. and SUMMIT PETROLEUM CORPORATION and Compass Bank
               (as amended, restated, or supplemented from time to time, the
               "CREDIT AGREEMENT")

Ladies and Gentlemen:

          Pursuant to the Credit Agreement, the Borrower hereby makes the
requests indicated below:

/ /  1.   Loans:

     (a)  Amount of new Loan: $_________________

     (b)  Requested funding date: ________________, 19__

     (c)  $_______________ of such Loan is to be an Index Rate Loan;

          $_______________ of such Loan is to be a LIBOR Loan.

          Requested Interest Period for LIBOR Loan:_______ months.

/ /  2.   Continuation or conversion of LIBOR Loan maturing on _________, 19__:

     (a)  Amount to be continued as a LIBOR Loan is $_________________, with an
          Interest Period of ____ months;

     (b)  Amount to be converted to an Index Rate Loan is $________________.

/ /  3.   Conversion of Index Rate Loan:

     (a)  Requested conversion date: ________________, 19__.

     (b)  Amount to be converted to a LIBOR Loan is $____________, with an
          Interest Period of _______ months.

          The undersigned certifies that he is the President of Midland 
Resources, Inc., has obtained all consents necessary, and as such he is 
authorized to execute this request on behalf of the Borrower.  The 
undersigned further certifies, represents, and warrants on behalf of the 
Borrower that the Borrower is entitled to receive the requested borrowing, 
continuation, or conversion under the terms and conditions of the Credit 
Agreement.

          Each capitalized term used but not defined herein shall have the 
meaning assigned to such term in the Credit Agreement.
<PAGE>

                                       Very truly yours, 

                                       MIDLAND RESOURCES, INC.


                                       By: ______________________________
                                           D. H. Warley, III
                                           President

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